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WorkpaperIAS 38 — Intangible AssetsL3

Indefinite life and impairment

2 missions10 sections to document40 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

Review at each year-end whether the indefinite life is still supported, organise the annual impairment test (recoverable amount provided under IAS 36), record the impairment loss and, if the life becomes finite, calculate the prospective charge. Prepare the disclosures.

10 sections · 20 blocks · 3 calculations · 2 entries

  • IAS 38 §88
  • IAS 38 §90
  • IAS 38 §107
  • IAS 38 §108
  • IAS 38 §109
  • IAS 38 §110
  • IAS 38 §111
  • IAS 38 §122

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

2 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Broadcasting licences: finite or indefinite useful life
Case tasks documented here
  • Is the indefinite useful life of licence A still supported at 31 December 20X1? What are the consequences?
  • Calculate the impairment loss on licence A at 31 December 20X1.
  • Calculate the amortisation charge for licence A for 20X2.
  • Which entries do you record at 31 December 20X1?
  • Which amortisation entry for licence A will you record in 20X2?
1

Inputs

Inputs

  • Indefinite-life asset reviewed (nature, rights, history)

    TextRequired

  • Date of the review and test (at least annual)

    DateRequired

    20X1-12-31

  • Carrying amount before impairment

    NumberRequired

    600,000

  • Recoverable amount determined under IAS 36 (provided)

    NumberRequired

    480,000

    Determining the recoverable amount falls under IAS 36 and is not redone here: the amount is provided.

  • Residual value retained if the life becomes finite

    Number

    0

  • Remaining useful life if the life becomes finite

    Number

    3 years

2

Supporting evidence

Evidence

  • Evidence obtained and referenced (category, document reference)

    EvidenceRequired

3

Review of the indefinite life and of the test

Analysis

IAS 38 §88IAS 38 §90IAS 38 §107IAS 38 §108IAS 38 §109IAS 38 §110IAS 38 §111

  • Factors considered to keep or not the indefinite life

    ChecklistRequired

    • Expected usage and life cycles of similar products
    • Technical, technological or commercial obsolescence
    • Stability of the industry and changes in demand
    • Period of control and legal limits

  • Impairment test

    ChecklistRequired

    • Asset not amortised while the life remains indefinite
    • Annual test and whenever there is an indication of impairment
    • Impairment determined under IAS 36
    • Change to a finite life treated as an indication of impairment
4

Impairment loss and revised charge

Calculations

IAS 38 §109IAS 38 §110IAS 38 §111

  • Impairment loss (carrying amount less recoverable amount)

    CalculationRequired

    120,000

    Carrying amount before impairment ; − Recoverable amount determined under IAS 36 (provided)

  • Carrying amount after impairment

    CalculationRequired

    480,000

    Carrying amount before impairment ; − Impairment loss (carrying amount less recoverable amount)

  • Annual amortisation from the change to a finite life

    Calculation

    160,000

    Carrying amount after impairment ; Residual value retained if the life becomes finite ; Remaining useful life if the life becomes finite

    Annual amount after the change to a finite life, a change in estimate accounted for prospectively (para. 109). If the change occurs during the year, amortisation runs from the date of the change: the charge for that year is calculated pro rata for the remaining months, and the annual amount applies to later years.

5

Journal entries

Entries

  • Impairment loss

    Entry

    AccountDebitCredit
    Impairment loss120,000
    Accumulated impairment120,000

  • Amortisation for the first full period with a finite life

    Entry

    AccountDebitCredit
    Amortisation expense160,000
    Accumulated amortisation160,000
6

Indefinite life kept or not

Judgment

IAS 38 §88IAS 38 §109IAS 38 §110

  • Conclusion on the useful life at the review date

    JudgmentRequired

    The life becomes finite: prospective change in estimate

    The life remains indefinite (events and circumstances unchanged) / The life becomes finite: prospective change in estimate

  • Rationale: facts relied on, analysis, alternative rejected

    TextRequired

7

Conclusion

Conclusion

  • Conclusion on the life, the impairment loss and the future charge

    ConclusionRequired

8

Financial statement impact

FS impact

  • Impact by caption, derived from the entries above (the Notes line refers to the disclosures)

    TableRequired

9

Disclosures

Disclosure

IAS 38 §122

  • Disclosures for an indefinite-life asset

    ChecklistRequired

    • Carrying amount of the indefinite-life asset
    • Reasons supporting the indefinite life and significant factors

    If the life becomes finite, the asset leaves this disclosure; impairment disclosures fall under IAS 36.

10

Normative references

References

  • Paragraphs cited in this workpaper (verification status shown from the register)

    References

11

Checks and financial statement impact

  • The impairment loss is determined (nil if none)Pass
  • The impairment entry is balancedPass
  • The amortisation entry is balancedPass
Assets
-280,000
Liabilities
0
Profit or loss
-280,000
OCI
0
Equity
-280,000