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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 IFRS is correct?

Amortisation starts when the intangible asset is available for use, and the useful life and amortisation method must be reviewed at least at each year end. Any change is a change in estimate, and the charge goes through profit or loss.

  1. AAmortisation begins when the asset is available for use, and the useful life is reviewed at least at each year endCorrect
  2. BAmortisation begins only when the asset first generates revenue, and the useful life is never reviewed
  3. CAmortisation is charged only if the asset's fair value falls below cost
  4. DAmortisation is charged to other comprehensive income rather than profit or loss

Explanation

IAS 38 requires amortisation to start when the asset is available for use and the useful life and method to be reviewed at least annually. Changes are treated as changes in estimate. Amortisation is normally an expense in profit or loss, and it is not dependent on fair value falling.

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