IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley IFRS: Practical Implementation Guide and Workbook

10.2 "Indefinite" does not mean "infinite." Additionally , assessments should not be made based on levels of future expenditure over and above that which would normally be required to maintain the asset at it initial standard of performance. 11. AMORTIZATION 11.1 The depreciable amount of tangible assets with finite useful lives is to be allocated over its useful life. The depreciable amount is the cost of the asset (or other amount substituted for cost, e.g., in a revaluation model) less its residual value. Amortization shall commence when the asset is ready for use and shall cease when it is derecognized or is reclassified as held for sale under IFRS 5. 11.2 The residual value is to be assumed to be zero unless there is a commitment by a third party to acquire the asset at the end of its useful life or there is an active market for the asset and the re– sidual value can be determined by reference to that market, and it is probable that an active market will continue to exist at the end of the asset' s useful life. 11.3 Therefore, an asset with a residual value at anything other than zero assumes that the entity will dispose of the asset prior to the end of the asset's economic life. 11.4 The Standard requires that the residual value be reassessed at each balance sheet date. Any changes are to be treated as changes in accounting estimates. In practice, this is unlikely to have any impact in view of the basic presumption of a zero residual value. 11.5 Similarly, the useful life is to be reassessed annually. Any changes are also to be treated as changes in accounting estimates. 11.6 Intangible assets with indefinite useful lives are not to be amortized. However, the asset must be tested for impairment annually and whenever there is an indication that it may be impaired. lAS 36 provides guidance on impairment. Additionally, the determination of an indefinite useful life must be reassessed at each balance sheet date. If the assessment changes, it is to be treated as a change in accounting estimate. 12. IMPAIRMENT Entities are to apply the provisions of lAS 36 in assessing the recoverable amount of intangible assets and when and how to determine whether an asset is impaired. 13. RETIREMENTS AND DISPOSALS 13.1 Intangible assets shall be derecognized on disposal or when no future economic benefits are expected to be derived from their use or disposal. 13.2 Any gain or loss on derecognition amounts to the difference between the net disposal pro– ceeds, if any, less the carrying amount of the asset. The gain or loss is to be recognized in the in– come statement. 14. DISCLOSURES 14.1 The Standard requires these disclosures for each class of intangible asset, distinguishing between internally generated and other assets: • Whether useful lives are indefinite or finite and, if finite, the useful lives or amortization rates used • The amortization methods used • The gross carrying amount and accumulated amortization and impairment losses at the beginning and end of the period • The line items in the income statement in which amortization is included • Additions, separately showing those internally generated, those acquired separately, and

those acquired through business combinations • Assets classified as held for sale under IFRS 5 • Increases or decreases during the period resulting from revaluations • Impairment losses • Reversals of impairment losses