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ACCA Applied Knowledge · Financial Accounting · Intangible non-current assets and amortisation

Which statement about amortisation of an intangible asset with a finite useful life under IAS 38 is correct?

Amortisation of a finite-life intangible begins when the asset is available for use, meaning it is ready to operate as management intends. It does not depend on when revenue first arises, and residual value is normally assumed to be zero.

  1. AAmortisation begins when the asset is available for useCorrect
  2. BAmortisation begins only when the asset generates its first revenue
  3. CThe residual value is always assumed to be the original cost
  4. DAmortisation is never charged in the year of acquisition

Explanation

IAS 38 requires amortisation to start when the asset is available for use, i.e. in the location and condition needed to operate as intended. It does not wait for first revenue. Residual value is normally assumed to be zero, not cost, and a charge in the year of acquisition is usual.

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