Amortisation of unused assets

Learning objectives

• Explain why amortisation continues for an asset that is idle.L2

Normative references

• IAS 38 §117Amortisation of an asset with a finite useful life does not cease when the asset is no longer used, unless it has been fully amortised or is classified as held for sale.

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

8 questions

• True or false? An entity that temporarily stops using a licence with a finite useful life suspends its amortisation until use resumes.L2
• True or false? A software platform with a finite useful life, amortised on a straight-line basis, withdrawn from operations while management decides on its future, continues to be amortised.L2
• True or false? A licence with a finite useful life, unused and already fully amortised, continues to generate an amortisation charge as long as it appears in the entity's records.L2
• True or false? An intangible asset with a finite useful life, unused and classified as held for sale, continues to be amortised until it is actually sold.L2
• Pellardi holds several intangible assets with finite useful lives that are amortised on a straight-line basis and not yet fully amortised. In which of these situations does amortisation of the asset cease?L2
• Corvenne acquired a licence for training content for 60,000, amortised on a straight-line basis over 10 years with no residual value. In 20X3, for lack of trainers, the licence is not used at all; it is not classified as held for sale and will be used again in 20X4. What amortisation charge does Corvenne recognise for 20X3?L2
• A management controller asks why amortisation of a finite-life licence, amortised on a straight-line basis, continues although it remained unused for the whole year. Which answer is consistent with IAS 38?L2
• Lisandre has stopped using a finite-life manufacturing patent after a production line was shut down. It is negotiating to license the patent to a foreign manufacturer from next year. The patent is not classified as held for sale. Which treatment should be adopted at the year-end?L2