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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Tulsi Digital Ltd. has recognised a licence with an indefinite useful life. Its finance head makes four statements. Which statement is consistent with Ind AS 38 and Ind AS 36 requirements for impairment testing of this asset?

An indefinite-life licence must be tested for impairment by comparing recoverable amount with carrying amount every year, and also whenever an indication of impairment exists. Testing is not limited to the recognition year, not optional because of past profits, and not restricted to finite-life assets.

  1. ARecoverable amount must be compared with carrying amount every year and whenever an impairment indicator arisesCorrect
  2. BImpairment testing is needed only in the year the licence is first recognised
  3. CImpairment testing is needed only when the licence has a finite useful life
  4. DImpairment testing is optional if the licence has been profitable in earlier years

Explanation

For an indefinite-life intangible asset, Ind AS 38 requires an impairment test under Ind AS 36 comparing recoverable amount with carrying amount annually and whenever there is an indication of impairment. Past profitability or recognition year do not waive this. Finite-life assets are tested when indicators exist, so restricting testing to them reverses the rule.

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