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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Tarang Pharma Ltd. holds a brand with an indefinite useful life, carried at ₹40 crore. No adverse events occurred during the year. Which statement about impairment testing under Ind AS 38 read with Ind AS 36 is correct?

Tarang must test the brand annually and also whenever an indication of impairment exists. Indefinite-life intangibles are not amortised, so Ind AS 36 requires comparing recoverable amount with carrying amount every year regardless of whether any adverse events occurred.

  1. ATest only when an indication of impairment exists
  2. BTest annually, and also whenever there is an indication of impairmentCorrect
  3. CTest every three years, and when there is an indication of impairment
  4. DNo testing is needed because indefinite-life assets are not amortised

Explanation

Under paragraph 108, an intangible asset with an indefinite useful life must be tested for impairment under Ind AS 36 by comparing recoverable amount with carrying amount annually and whenever there is an indication of impairment. The absence of adverse events does not remove the annual test. Non-amortisation is the reason testing is required.

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