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CMA Final · Corporate Financial Reporting · Intangible Assets (Ind AS 38)

Nirmal Pharma Ltd holds a brand with an indefinite useful life, carrying amount Rs 40 crore. No impairment indicator exists at the year end. Under Ind AS 38 read with Ind AS 36, what must the company do?

The company must test the brand for impairment every year by comparing its recoverable amount with its carrying amount, and also whenever there is an indication that it may be impaired. Lack of an impairment indicator does not exempt an indefinite-life asset from the annual test.

  1. ATest it for impairment only when an indicator arises
  2. BAmortise it over 40 years and skip the impairment test
  3. CTest it for impairment annually by comparing recoverable amount with carrying amount, and also whenever there is an indication of impairmentCorrect
  4. DTest it for impairment every three years

Explanation

Ind AS 38 requires an indefinite-life intangible asset to be tested under Ind AS 36 by comparing recoverable amount with carrying amount annually and whenever there is an indication of impairment. Absence of an indicator does not remove the annual test.

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