What is a finite lived intangible asset?
Finite-lived intangible assets are intangible assets with a limited legal and/or useful life. Finite-lived intangible assets must be carried in the financial statements at cost less amortization and impairment.
What is indefinite life?
Definition: The indefinite useful life of an asset means that the asset’s usefulness to the business is not limited by age, legal or regulatory obligations, contracts, or any other factory. In other words, the asset will last forever. It cannot be worn out and cannot be fully used up.
How should intangible assets with finite lives be accounted for?
If an intangible asset has a finite useful life, then amortize it over that useful life. The amount to be amortized is its recorded cost, less any residual value. However, intangible assets are usually not considered to have any residual value, so the full amount of the asset is typically amortized.
What is the difference between finite and indefinite life intangible assets?
Intangible assets with identifiable useful lives (limited-life) include copyrights and patents. Indefinite-life tangibles are not amortized because there is no foreseeable limit to the cash flows generated by those intangible assets. Instead of amortization, indefinite-life assets are evaluated for impairment yearly.
What is a long lived asset?
Long-lived assets, also referred to as non-current assets or long-term assets, are assets that are expected to provide economic benefits over a future period of time, typically greater than one year. Long-lived assets may be tangible, intangible, or financial assets.
Can you reverse impairment under GAAP?
GAAP prohibits the reversal of all impairment losses. But, under IFRS, impairment losses for intangibles other than goodwill and for fixed assets can be reversed. Reversal of impairment losses under IFRS are capped at the asset’s initial carrying amount.
Do intangible assets have finite life?
An intangible asset with a finite useful life is amortised and is subject to impairment testing. An intangible asset with an indefinite useful life is not amortised, but is tested annually for impairment. When an intangible asset is disposed of, the gain or loss on disposal is included in profit or loss.
What are some examples of long lived assets?
Examples of long-lived tangible assets, typically referred to as and sometimes as fixed assets, include land, buildings, furniture and fixtures, machinery and equipment, and vehicles; examples of long-lived (assets lacking physical substance) include patents and trademarks; and examples of long-lived financial assets …
What is the amount of impairment loss under US GAAP?
The impairment loss is the amount by which the carrying amount of the CGU (including goodwill) exceeds its recoverable amount. That loss is then allocated first to goodwill, until goodwill is reduced to zero.