CAF-6 · Chapter 12 · Question 5 of 15
A company holds a broadcasting license that is renewable every 10 years at a negligible cost. The company intends to renew it indefinitely and there is no foreseeable limit to the period over which it will generate net cash inflows. How should this asset be amortized?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It should not be amortized, but tested for impairment annually.
Explanation
An intangible asset with an indefinite useful life is not amortized. Instead, it must be tested for impairment at least annually, and whenever there is an indicator of impairment.
More IAS 38 Intangible Assets MCQs
- Q7During 20X6, Beta Ltd spent Rs. 500,000 on developing a new manufacturing process. The criteria for capitalization were met on 1 September…
- Q8An entity purchases a customer list for Rs. 2,000,000. It expects to use the list to generate sales for the next 4 years, after which it…
- Q9Which of the following is NOT an essential criterion for an item to meet the definition of an intangible asset?
- Q10A company is developing a corporate website solely to provide information about its products and company history (an electronic brochure)…
- Q11An entity cannot distinguish the research phase from the development phase of an internal project. Under IAS 38, the entity must treat all…