Mandatory annual tests

Learning objectives

• Identify the assets tested annually even without any indication: intangible assets with an indefinite useful life, intangible assets not yet available for use and goodwill acquired.L1, L2
• Explain the flexibility in the timing of the annual test and the rationale for testing intangible assets not yet available for use.L2

Normative references

• IAS 36 §10Requires, even without any indication, an annual test for intangible assets with an indefinite useful life or not yet available for use (the test may be performed at any time during the annual period, provided it is performed at the same time every year, and before the end of the period for an asset initially recognised during that period), and for goodwill acquired in a business combination.
• IAS 36 §11Justifies the annual test of intangible assets not yet available for use by the greater uncertainty about their ability to generate sufficient future economic benefits.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

12 questions

• True or false? Goodwill acquired in a business combination is tested for impairment every year, even if there is no indication of impairment.L1
• True or false? An intangible asset with an indefinite useful life is tested only if an indication of impairment arises at the reporting date.L1
• Which of the following assets must be tested for impairment annually even if there is no indication? (Several answers possible.)L1
• Granvel Ltd, whose reporting date is 31 December, holds a brand with an indefinite useful life. When may it perform the annual impairment test of this brand?L2
• True or false? When an intangible asset with an indefinite useful life was first recognised during the current annual period, it must be tested before the end of that period.L2
• Why does IAS 36 require an annual test for an intangible asset that is not yet available for use?L2
• Sorélia Ltd has capitalised EUR 750,000 of development expenditure for a software platform that will not be available for use until 20X3. At 31 December 20X2, no indication of impairment has been identified and the project is on schedule. What does IAS 36 require?L2
• Valdorine Ltd has a 31 December reporting date. Every year it tests a licence with an indefinite useful life on 30 June. On 1 October 20X1, it acquires a second licence, also with an indefinite useful life. There is no indication of impairment at 31 December 20X1. Which analysis is consistent with IAS 36?L2
• For which of these assets is an impairment test required every year, whether or not there is an indication?L1
• True or false? An entity may skip the annual test of its acquired goodwill in a year in which no indication of impairment has arisen, provided it resumes the test the following year.L2
• Which of the following statements about the annual test of intangible assets with an indefinite useful life or not yet available for use are correct? (Several answers possible.)L2
• At 31 December 20X2, the Merlance group holds: an acquired customer list amortised over 6 years; internally developed management software, being finalised and not yet in use; the goodwill arising on the acquisition of Arbelle Ltd; a warehouse depreciated over 30 years. No indication of impairment is identified. Which assets must Merlance nevertheless test in 20X2?L2