IAS 38Chapter 9Lesson 1
Finite or indefinite useful life; contractual rights and renewals
Step 1 of 8Learning objectives
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Before amortising, the entity must know how long the intangible asset will produce benefits. It assesses whether the useful life is finite or indefinite, using many factors; 'indefinite' does not mean 'infinite'. For a contractual or legal right, the useful life does not exceed the term of the right and includes renewals only if they are supported by evidence and involve no significant cost. The lesson quantifies the effect of these choices on the amortisation charge.
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Learning objectives
- Distinguish finite and indefinite useful lives, and explain why 'indefinite' does not mean 'infinite'.
- Assess the useful life from the relevant factors (use, obsolescence, demand, competition, maintenance, legal limits).
- Determine the useful life of a contractual or legal right and assess whether its renewals are supported and involve no significant cost.
- Calculate the effect of the chosen life on the amortisation charge and document the conclusion in a working paper.