intangibles have either a limited useful life or an indefini

intangibles have either a limited usef\'ul life or an indefinite usefu Ife. How should these two different types f intangibles be amortized?

Solution

Limited life intangibles assets have a defined useful life. Examples inlude copyrights, patents,etc. Limited life intangibles are amortized using either units of activity method or straight line method. Amortisation value is difference between cost of the intagible asset and residual value of the intangible asset.

Indefinite life intangible assets dont have a defined useful life. Examples include goodwill, trademark, etc. Indefinite life intangible assets are not amortized as there is no foreseeable limit to cashflows generated. Instead they are evaluated for impairment on yearly basis. If there is impairment, then loss will be recognised.