Page 154 - IC26 LIFE INSURANCE FINANCE

Amortisation Period

The depreciable amount of an intangible asset should be allocated on a systematic basis

over the best estimate of its useful life. There is presumption, unless contrary can be proved,

that the useful life of an intangible asset will not exceed ten years from the date when the

asset is available for use. Amortisation should commence when the asset is available for use.

Amortisation Method

A variety of amortisation methods can be used to allocate the depreciable amount of an asset

on a systematic basis over its useful life. These methods include the straight-line method,

the diminishing balance method and the unit of production method. The method used

for an asset is selected based on the expected pattern of consumption of economic benefits

and is consistently applied from period to period.

Residual Value

The residual value of an intangible asset should be assumed to be zero unless:

a. There is a commitment by a third party to purchase the asset at the end of its useful life

or

b. There is an active market for the asset and:

i. Residual value can be determined by reference to that market and

ii. It is probable that such a market will exist at the end of the asset’s useful life.

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