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Intangible assets

2.2 Amortisation

IAS 38 says that ‘the depreciable amount of an intangible asset with a finite
useful life shall be allocated on a systematic basis over its useful life’ (IAS 38,
para 97).

An intangible asset with an indefinite useful life (or a useful life that cannot be reliably
estimated) should not be amortised. An asset has an indefinite useful life if there is
no foreseeable limit to the period over which the asset is expected to generate net
cash inflows for the entity. Instead, the intangible asset is subject to an annual
impairment review to ensure that its carrying amount in the financial statements does
not exceed its recoverable amount.

2.3 Subsequent treatment

Each project should be reviewed at the year-end to ensure that the ‘SECTOR’ criteria
are still met. If they are no longer met, the previously capitalised expenditure must
be written off to the statement of profit or loss immediately.

Illustrations and further practice

Now try questions TYU 2 and TYU 3 from Chapter 9 of the Study Text.

Tutor notes guidance – discussion points

Take students through Illustration 1 from Chapter 9 of the Study Text.

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