The decrease in value is called an impairment loss which is recognised in P&L in the period incurred. The entity should reduce the carrying amount of the asset to its recoverable amount. Some examples of indefinite-life intangibles are goodwill, trademarks, and perpetual franchises. Intangible Assets with an Indefinite Life An intangible asset with an indefinite life is not amortised, but is tested for impairment and written down to its recoverable amount. Since intangible assets are typically expensed according to their respective life expectancy, it is important to understand the difference between limited-life intangible assets and indefinite-life intangible assets. If there is an impairment of intangible assets, you must recognize an impairment loss. Because Indefinite-life tangibles continue to generate cash they can’t be amortized; they must be evaluated for impairment yearly. Examples of intangible assets with a limited-life include copyrights and patents. The difference between the reduction from the previous carrying amount to the recoverable amount is known as an impairment loss. debit to loss on impairment of $12,000. Intangible assets with indefinite lives are not amortized. Goodwill in accounting is an Intangible Asset that is generated when one company purchases another company at a price which is higher than that of the sum of the fair value of net identifiable assets of the company at the time of acquisition and it is calculated by subtracting the fair value of net identifiable assets of the company from the total purchase price. In each case the journal entries show the debit and credit account together with a brief narrative. the higher of fair value less costs of disposal and value in use). Intangible Assets IAS 36 – Impairment of Assets IAS 38 –Intangible Assets IFRS 8 –Operating Segments Overview of Major Differences ASPE and IFRS have several significant differences in their treatment of asset impairment. Impairment exists when the carrying amount exceeds the asset’s fair value. Increases in value in excess of prior impairment loss is debited directly to the asset and credited to a revaluation reserve account in the equity section of the balance sheet. Intangible assets are assets which lack physical substance. According to IAS 36, reversal of impairment losses for goodwill are not allowed. the amount by which the carrying value, which is $175 million, exceeds the fair value, i.e. Intangible assets are created through time and effort, and are identifiable as separate assets. The impairment cost is calculated as follows: carrying value – recoverable amount. Because the carrying value is higher than the sum of undiscounted cash flows, the license is impaired. Limited-life intangibles are intangible assets with a limited useful life, such as copyrights, patents and trademarks. Impairment testing is the process to ensure that the assets are not carried more than their recoverable amount. Additionally, based on regulations, certain intangible assets are restricted and given limited life spans, while others are infinite in their economic life and not amortized. Journal entry for recording the impairment is the debit to the loss account or to expense account with the corresponding credit to an underlying asset. JOURNAL ENTRIES: For each item below, record the appropriate journal entry: A. Only intangible assets with an indefinite life are reassessed each year for impairment. The approach of basing tax deductions on individual companies’ accounting entries reflects the diverse nature of intangible assets and the wide variation in their economic lives in different … Limited-life intangibles are intangible assets with a limited useful life, such as copyrights, patents and trademarks. The Impairment cost is calculated as: The carrying amount is defined as the value of the asset as displayed on the balance sheet. 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