What is the accounting treatment for intangible assets with indefinite useful lives?
Short Answer
Indefinite-life intangible assets are not amortised but must be tested for impairment at least annually under IAS 36. They include certain brands, trademarks, broadcasting rights, and perpetual licences with no foreseeable expiration.
Full Explanation
Under IAS 38, an intangible asset is classified as having an indefinite useful life when there is no foreseeable limit to the period over which it is expected to generate net cash inflows. This classification requires positive evidence — the default assumption is finite life, and indefinite-life classification must be actively justified. Common indefinite-life intangible assets include: well-established brands and trademarks (where ongoing investment maintains or enhances their value, there is no expiration date, and the brand is expected to generate economic benefits for the foreseeable future), perpetual licences and concessions (regulatory approvals that are renewable at negligible cost and for which renewal is reasonably certain), and certain artistic-related assets (publishing titles, television brands, music catalogue trademarks). Indefinite-life intangibles are not amortised — instead, they are tested for impairment at least annually under IAS 36, regardless of whether there are indicators of impairment. The impairment test compares the carrying amount to the recoverable amount (higher of fair value less disposal costs and value-in-use). The indefinite-life classification must be reassessed each reporting period. If circumstances change (new competitor eroding brand value, regulatory changes threatening licence renewal), the asset may be reclassified to finite life and amortised prospectively. Under US GAAP (ASC 350), the treatment is similar — indefinite-life intangible assets are not amortised but are tested for impairment at least annually, with the option to first perform a qualitative assessment before the quantitative test.
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Further Reading
What is the IAS 38 revaluation model for intangible assets?
IAS 38 permits revaluation of intangible assets to fair value if an active market exists, but this is rarely used in practice because active markets for most intangible assets do not exist.
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