Ind AS 38 - Intangible Assets: A Comprehensive Guide for CA Final Students

Ind AS 38, 'Intangible Assets', is a critical standard for CA Final students, governing the accounting treatment of non-physical assets like patents, copyrights, software, and brands. It dictates how these assets are recognised, measured, amortised, and disclosed in financial statements, ensuring that their economic benefits are appropriately reflected.

Understanding Ind AS 38 is vital for CA Final Paper 1: Financial Reporting, as it frequently features in theoretical and practical questions, especially concerning internally generated intangibles and the distinction between research and development costs.

Quick Answer for Featured Snippets:
Ind AS 38 defines an intangible asset as an identifiable non-monetary asset without physical substance. It is recognised if it is probable that future economic benefits attributable to the asset will flow to the entity and the cost of the asset can be measured reliably. Key aspects include distinguishing between research and development, and determining finite vs. indefinite useful lives for amortisation.

Introduction to Ind AS 38: Intangible Assets

Ind AS 38 lays down the principles for the recognition, measurement, amortisation, and disclosure of intangible assets. It aims to ensure that users of financial statements understand the entity's investment in intangibles and the changes in those assets during the period. Unlike tangible assets (covered by Ind AS 16), intangible assets lack physical substance, making their identification and measurement particularly challenging.

Scope of Ind AS 38:

• Applies to all intangible assets, except those specifically excluded by other Ind AS (e.g., deferred tax assets, financial assets, goodwill in a business combination, exploration and evaluation assets).
• Crucial for entities with significant intellectual property, software development, or brand value.

Importance for CA Final Students:

• High weightage in CA Final Financial Reporting (Paper 1).
• Requires deep understanding of recognition criteria, especially for internally generated assets.
• Distinction between research and development is a frequent exam topic.
• Impacts valuation, profit calculations, and balance sheet presentation.

Definition and Key Characteristics of an Intangible Asset

As per Ind AS 38.8, an intangible asset is an identifiable non-monetary asset without physical substance. For an asset to qualify as an intangible asset under Ind AS 38, it must meet three key characteristics:

• Identifiability: An intangible asset is identifiable if it either:
  (a) is separable, i.e., capable of being separated or divided from the entity and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, identifiable asset, or liability; or
  (b) arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

• Control: An entity controls an asset if it has the power to obtain the future economic benefits flowing from the underlying resource and to restrict others' access to those benefits. This control usually arises from legal rights (e.g., copyrights, patents) but can also arise from other means if the entity can restrict access to the benefits.

• Future Economic Benefits: These benefits may include revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset. Examples include intellectual property, customer relationships, brand recognition, and technological know-how.

Distinction from Goodwill: Goodwill is also an intangible asset without physical substance, but it is not 'identifiable' (cannot be separated or arise from legal rights). Therefore, it is accounted for under Ind AS 103 (Business Combinations) and Ind AS 36 (Impairment of Assets), not Ind AS 38.

Recognition Criteria: When to Capitalise an Intangible Asset?

An intangible asset shall be recognised only if, and only if:

• Probable Future Economic Benefits: It is probable that the expected future economic benefits that are attributable to the asset will flow to the entity. This requires an assessment of the degree of certainty that the future economic benefits will flow to the entity, based on available evidence at the time of initial recognition.

• Reliable Measurement of Cost: The cost of the asset can be measured reliably. This is generally easier for separately acquired assets but can be challenging for internally generated ones.

Key Insight: These two criteria apply to both separately acquired and internally generated intangible assets. If an item does not meet these criteria, it must be expensed as incurred.

Initial Measurement of Intangible Assets

An intangible asset shall be measured initially at cost. The determination of cost depends on how the intangible asset was acquired.

1. Separately Acquired Intangible Assets

• Cost includes: purchase price (including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates) and any directly attributable cost of preparing the asset for its intended use.
• Examples of directly attributable costs: professional fees, costs of testing the asset.

2. Acquired in a Business Combination

• Recognised at its fair value at the acquisition date.
• If an intangible asset acquired in a business combination has an indefinite useful life, it is not amortised but tested for impairment annually (Ind AS 36).

3. Acquired by way of Government Grant

• Recognised initially at fair value or at a nominal amount plus any directly attributable expenditure (Ind AS 20).
• Example: Grants for developing specific technologies.

4. Acquired by Exchange of Assets

• Measured at fair value, unless the exchange transaction lacks commercial substance or the fair value of neither the asset received nor the asset given up is reliably measurable.
• If not measured at fair value, it is measured at the carrying amount of the asset given up.

Internally Generated Intangible Assets: Research vs. Development

Ind AS 38 imposes strict criteria for recognising internally generated intangible assets, distinguishing between the research phase and the development phase. This is a highly examinable area.

Research Phase

• Definition: Original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding.
• Treatment: All expenditure incurred in the research phase must be expensed as incurred. An intangible asset arising from research (or from the research phase of an internal project) shall not be recognised.
• Rationale: At the research stage, an entity cannot demonstrate that an intangible asset exists that will generate probable future economic benefits.

Development Phase

• Definition: The application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems, or services before the start of commercial production or use.
• Treatment: Expenditure incurred in the development phase shall be capitalised as an intangible asset if, and only if, an entity can demonstrate all of the following six criteria (often remembered by the acronym PIRATE):
  • Probable future economic benefits.
  • Intention to complete the intangible asset and use or sell it.
  • Resources (technical, financial) to complete and use or sell the asset.
  • Ability to use or sell the intangible asset.
  • Technical feasibility of completing the intangible asset for use or sale.
  • Expenditure attributable to the intangible asset can be measured reliably.

Internally Generated Brands, Mastheads, Customer Lists, etc.

• Internally generated brands, mastheads, publishing titles, customer lists, and items similar in substance shall not be recognised as intangible assets.
• Rationale: The cost of such items cannot be distinguished from the cost of developing the business as a whole.

Internally Generated Software

• Can be recognised as an intangible asset if it meets the general recognition criteria and the specific development phase criteria (PIRATE).
• Expenditure on maintaining or enhancing existing software is generally expensed unless it significantly improves functionality or extends useful life.

Journal Entry Example:
Scenario: Company incurs ₹10,000,000 on research and ₹15,000,000 on development for a new product. Development costs meet PIRATE criteria.

Research Entry:
Dr. Research Expense A/c ₹10,000,000
Cr. Bank/Payables A/c ₹10,000,000
(Being research expenditure expensed as incurred)

Development Entry:
Dr. Intangible Asset (Development Costs) A/c ₹15,000,000
Cr. Bank/Payables A/c ₹15,000,000
(Being development expenditure capitalised as intangible asset)

Subsequent Measurement: Cost Model vs. Revaluation Model

After initial recognition, an entity shall choose either the cost model or the revaluation model as its accounting policy for each class of intangible assets.

1. Cost Model

• The intangible asset is carried at its cost less any accumulated amortisation and any accumulated impairment losses.
• This is the most commonly used model for intangible assets.

2. Revaluation Model

• The intangible asset is carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated amortisation and subsequent accumulated impairment losses.
• Condition: Revaluations are permitted only if fair value can be determined by reference to an active market for that asset. Active markets for intangible assets are rare (e.g., some freely tradable emission rights, production quotas).
• Treatment of Revaluation: Revaluation increases are credited to Other Comprehensive Income (OCI) and accumulated in 'Revaluation Surplus' within equity. Revaluation decreases are expensed to P&L, unless they reverse a previous revaluation increase, in which case they reduce the revaluation surplus.

Useful Life and Amortisation of Intangible Assets

The useful life of an intangible asset is a critical determinant of its accounting treatment.

1. Finite Useful Life

• An intangible asset with a finite useful life is amortised over its useful life.
• Amortisable Amount: Cost (or revalued amount) less residual value.
• Residual Value: Usually assumed to be zero, unless there is a commitment by a third party to purchase the asset at the end of its useful life, or there is an active market for the asset and its residual value can be determined by reference to that market.
• Amortisation Period: Commences when the asset is available for use. Ceases at the earlier of the date the asset is classified as held for sale (or included in a disposal group) or the date it is derecognised.
• Amortisation Method: Must reflect the pattern in which the asset's future economic benefits are expected to be consumed (e.g., straight-line, diminishing balance, units of production). If the pattern cannot be determined reliably, the straight-line method must be used.
• Review: Useful life and amortisation method must be reviewed at least at each financial year-end. Changes are accounted for prospectively as a change in accounting estimate (Ind AS 8).

Formula for Annual Amortisation:
$\text{Annual Amortisation} = \frac{\text{Cost (or Revalued Amount)} - \text{Residual Value}}{\text{Useful Life (in years)}}$

Journal Entry for Amortisation:
Dr. Amortisation Expense A/c
Cr. Accumulated Amortisation A/c

2. Indefinite Useful Life

• An intangible asset with an indefinite useful life is not amortised.
• Rationale: There is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.
• Impairment Test: Instead of amortisation, such assets must be tested for impairment annually, or more frequently if there is an indication that the asset may be impaired (Ind AS 36).
• Review: The assessment of indefinite useful life must be reviewed at least at each financial year-end. If the assessment changes from indefinite to finite, the asset is then amortised prospectively.

Exam Tip: Always justify the useful life (finite/indefinite) and the amortisation method chosen in your answers.

Impairment and Derecognition of Intangible Assets

Impairment of Intangible Assets

• Intangible assets are subject to the impairment requirements of Ind AS 36 'Impairment of Assets'.
• Finite Useful Life: Tested for impairment whenever there is an indication that the asset may be impaired.
• Indefinite Useful Life / Not Yet Available for Use: Tested for impairment annually and whenever there is an indication that the asset may be impaired.
• Impairment Loss: Recognised if the carrying amount exceeds its recoverable amount (higher of fair value less costs to sell and value in use).

Derecognition of Intangible Assets

• An intangible asset shall be derecognised (removed from the balance sheet):
  • On disposal (e.g., sale, licensing).
  • When no future economic benefits are expected from its use or disposal.
• Gain or Loss: The gain or loss arising from the derecognition of an intangible asset shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the asset. It shall be recognised in profit or loss when the asset is derecognised.

Disclosure Requirements (Ind AS 38.118-128)

Entities must disclose extensive information about their intangible assets to provide transparency to financial statement users.

Key Disclosures include:

• For each class of intangible assets, distinguishing between internally generated and other intangible assets:
  • Whether the useful lives are finite or indefinite.
  • The useful lives or the amortisation rates used.
  • The amortisation methods used.
  • The gross carrying amount and the accumulated amortisation (aggregated with accumulated impairment losses) at the beginning and end of the period.
  • A reconciliation of the carrying amount at the beginning and end of the period showing additions, disposals, revaluations, amortisation charge, impairment losses, etc.
• The line item(s) in the statement of profit and loss in which amortisation of intangible assets is included.
• Expenditure on research and development recognised as an expense during the period.
• For intangible assets carried under the revaluation model, details like the effective date of revaluation, carrying amount, and revaluation surplus.

Key Differences: Ind AS 38 vs. AS 26 (Intangible Assets)

For CA Final students, understanding the transition and differences between the old Indian GAAP (AS 26) and Ind AS 38 is crucial.

Key Insight: Ind AS 38 is largely converged with IAS 38, while AS 26 was based on the older IAS 38. Therefore, Ind AS 38 introduces several changes.

Major Differences:

• Revaluation Model: Ind AS 38 permits the revaluation model for subsequent measurement if an active market exists (rare). AS 26 did not permit revaluation of intangible assets.
• Internally Generated Brands/Customer Lists: Both standards prohibit recognition. However, Ind AS 38 provides more explicit guidance.
• Capitalisation of Development Costs: While both use similar criteria, Ind AS 38's 'PIRATE' criteria are more detailed and stringent, particularly regarding 'technical feasibility' and 'intention'.
• Useful Life: Both distinguish between finite and indefinite. Ind AS 38 provides more explicit guidance on assessing indefinite useful life and the annual review.
• Amortisation: Ind AS 38 requires the amortisation method to reflect the pattern of consumption of economic benefits. If not reliably determinable, SLM is used. AS 26 also had similar requirements but with less emphasis on the 'pattern' aspect.
• Residual Value: Ind AS 38 generally assumes zero residual value unless specific conditions are met (third-party commitment or active market). AS 26 had similar assumptions but less detailed conditions.

Common Mistakes & CA Exam Tips for Ind AS 38

Mistakes to Avoid:

• Confusing Research & Development: Capitalising research costs or expensing development costs that meet PIRATE criteria.
• Recognising Internally Generated Brands: These are explicitly prohibited from recognition.
• Amortising Indefinite Life Intangibles: Remember, they are impairment tested annually, not amortised.
• Ignoring Impairment: Failing to apply Ind AS 36 for impairment testing, especially for indefinite life assets.
• Incorrect Residual Value: Assuming a residual value for intangibles without meeting the strict criteria.
• Lack of Justification: Not providing clear reasoning for useful life assessment or amortisation method.

Exam Tips:

• Master PIRATE: Memorise and understand the six criteria for capitalising development costs. This is a frequent question.
• Distinguish Acquisition Methods: Be clear on initial measurement rules for separately acquired, business combination, grant, and exchange scenarios.
• Practice Journal Entries: Especially for R&D, amortisation, and revaluation (if applicable).
• Focus on Disclosures: Be ready to list key disclosure requirements.
• Read the Scenario Carefully: Pay attention to dates, specific costs, and any changes in estimates.
• Link with Ind AS 36: Remember that impairment of intangibles is governed by Ind AS 36. You may need to apply its principles.

Practice Questions

Test your understanding of Ind AS 38 with these exam-style questions. Model answers are provided for self-assessment. These are designed to simulate CA Final written answer requirements.

Short Form Questions (Conceptual & Numerical)

Q1. Define an 'Intangible Asset' as per Ind AS 38 and explain its three key characteristics.

Model Answer:
As per Ind AS 38.8, an intangible asset is an identifiable non-monetary asset without physical substance. Its three key characteristics are:

1. Identifiability: It is separable (can be sold, transferred, licensed) or arises from contractual/legal rights.
2. Control: The entity has the power to obtain future economic benefits from the asset and restrict others' access to them.
3. Future Economic Benefits: The asset is expected to generate future economic benefits for the entity.

Q2. Explain the difference in accounting treatment for expenditure incurred during the 'Research Phase' and 'Development Phase' of an internally generated intangible asset project, as per Ind AS 38.

Model Answer:
Expenditure incurred during the Research Phase must be expensed as incurred because, at this stage, an entity cannot demonstrate that an intangible asset exists that will generate probable future economic benefits.
Expenditure incurred during the Development Phase shall be capitalised as an intangible asset if, and only if, the entity can demonstrate all six 'PIRATE' criteria: Probable future economic benefits, Intention to complete, Resources to complete, Ability to use/sell, Technical feasibility, and Expenditure reliably measurable.

Q3. An entity is developing a new software. During the year ended 31st March 2025, it incurred ₹50,00,000 on the research phase and ₹80,00,000 on the development phase. The development costs meet all the criteria for capitalisation under Ind AS 38. Pass the necessary journal entries.

Model Answer:
Journal Entries for the year ended 31st March 2025:

1. For Research Expenditure:
   Research Expense A/c Dr. ₹50,00,000
   To Bank/Payables A/c ₹50,00,000
   (Being research expenditure expensed as incurred)

2. For Development Expenditure:
   Intangible Asset (Software Development) A/c Dr. ₹80,00,000
   To Bank/Payables A/c ₹80,00,000
   (Being development expenditure capitalised as an intangible asset, meeting Ind AS 38 criteria)

Q4. Under what circumstances can an intangible asset be carried under the Revaluation Model as per Ind AS 38? What is the accounting treatment for revaluation increases and decreases?

Model Answer:
An intangible asset can be carried under the Revaluation Model only if its fair value can be determined by reference to an active market for that asset. Active markets for intangible assets are rare.

Accounting Treatment:

• Revaluation Increase: Credited to Other Comprehensive Income (OCI) and accumulated in 'Revaluation Surplus' within equity.
• Revaluation Decrease: Expensed to Profit or Loss, unless it reverses a previous revaluation increase, in which case it reduces the revaluation surplus in OCI.

Q5. Distinguish between an intangible asset with a 'finite useful life' and one with an 'indefinite useful life' under Ind AS 38, particularly regarding their subsequent accounting treatment.

Model Answer:

1. Finite Useful Life: An asset with a finite useful life is expected to generate economic benefits for a limited period. It is amortised systematically over its useful life. Its useful life and amortisation method are reviewed at least annually. Residual value is usually zero unless specific conditions are met.
2. Indefinite Useful Life: An asset with an indefinite useful life has no foreseeable limit to the period over which it is expected to generate net cash inflows. It is not amortised. Instead, it is tested for impairment annually (or more frequently if indicators exist) as per Ind AS 36. The assessment of indefinite useful life is also reviewed at least annually.

Case Studies (Comprehensive Scenarios with Full Solutions)

Case Study 1: Capitalisation of Development Costs and Amortisation

Tech Solutions Ltd. commenced a project to develop a new proprietary algorithm on 1st April 2024. The project involved two phases: Research and Development. Costs incurred were:

• Research Phase (1st April 2024 - 30th September 2024): ₹12,00,000
• Development Phase (1st October 2024 - 31st March 2025): ₹18,00,000

All development costs met the capitalisation criteria (PIRATE) under Ind AS 38. The algorithm was completed and available for use on 1st April 2025. The management estimates a useful life of 5 years for the algorithm with a nil residual value. The company uses the straight-line method for amortisation.

Requirements:
(a) Pass the journal entries for the year ended 31st March 2025.
(b) Calculate the amortisation expense for the year ended 31st March 2026 and pass the journal entry.
(c) State the carrying amount of the intangible asset as on 31st March 2026.

Model Solution:

(a) Journal Entries for the year ended 31st March 2025:

1. For Research Expenditure:
   Research Expense A/c Dr. ₹12,00,000
   To Bank/Payables A/c ₹12,00,000
   (Being research expenditure expensed as incurred as per Ind AS 38)

2. For Development Expenditure:
   Intangible Asset (Algorithm Development) A/c Dr. ₹18,00,000
   To Bank/Payables A/c ₹18,00,000
   (Being development expenditure capitalised as an intangible asset, meeting Ind AS 38 criteria)

(b) Amortisation for the year ended 31st March 2026:
Cost of Intangible Asset = ₹18,00,000
Useful Life = 5 years
Residual Value = Nil

Annual Amortisation = (Cost - Residual Value) / Useful Life
Annual Amortisation = (₹18,00,000 - ₹0) / 5 = ₹3,60,000

Journal Entry for Amortisation (31st March 2026):
Amortisation Expense A/c Dr. ₹3,60,000
To Accumulated Amortisation A/c ₹3,60,000
(Being amortisation charged on algorithm for the year)

(c) Carrying Amount as on 31st March 2026:
Cost of Intangible Asset = ₹18,00,000
Less: Accumulated Amortisation (for 1 year) = ₹3,60,000
Carrying Amount = ₹14,40,000

Case Study 2: Acquisition through Business Combination and Subsequent Impairment

On 1st April 2024, Alpha Ltd. acquired Beta Inc. in a business combination. As part of the acquisition, Alpha Ltd. identified a customer list of Beta Inc. with a fair value of ₹25,00,000. Alpha Ltd. determined that the customer list has an indefinite useful life. At 31st March 2025, due to significant competition and customer churn, Alpha Ltd. performed an impairment test. The recoverable amount of the customer list was estimated at ₹20,00,000.

Requirements:
(a) Pass the journal entry for the recognition of the customer list on 1st April 2024.
(b) Explain the accounting treatment for the customer list for the year ended 31st March 2025, specifically regarding amortisation.
(c) Calculate and pass the journal entry for any impairment loss on 31st March 2025.

Model Solution:

(a) Journal Entry for Recognition (1st April 2024):
Intangible Asset (Customer List) A/c Dr. ₹25,00,000
To Business Combination (Acquisition) A/c ₹25,00,000
(Being recognition of customer list acquired in a business combination at fair value as per Ind AS 103 and Ind AS 38)

(b) Accounting Treatment for Amortisation (Year ended 31st March 2025):
As per Ind AS 38, an intangible asset with an indefinite useful life is not amortised. Therefore, no amortisation expense will be recognised for the customer list for the year ended 31st March 2025. Instead, it must be tested for impairment annually.

(c) Impairment Loss (31st March 2025):
Carrying Amount of Customer List = ₹25,00,000
Recoverable Amount = ₹20,00,000

Impairment Loss = Carrying Amount - Recoverable Amount
Impairment Loss = ₹25,00,000 - ₹20,00,000 = ₹5,00,000

Journal Entry for Impairment Loss (31st March 2025):
Impairment Loss Expense A/c Dr. ₹5,00,000
To Intangible Asset (Customer List) A/c ₹5,00,000
(Being impairment loss recognised on customer list as per Ind AS 36)

Case Study 3: Change in Useful Life Estimate for an Intangible Asset

On 1st April 2022, Innovate Ltd. acquired a patent for ₹10,00,000. It was estimated to have a useful life of 10 years with nil residual value. The company uses the straight-line method for amortisation. On 1st April 2025, due to rapid technological advancements, the management revised the remaining useful life of the patent to 3 years.

Requirements:
(a) Calculate the amortisation expense for the years ended 31st March 2023 and 31st March 2024.
(b) Determine the carrying amount of the patent as on 1st April 2025 (before revision).
(c) Calculate the amortisation expense for the year ended 31st March 2026 after the revision in useful life and pass the journal entry.

Model Solution:

(a) Amortisation for 2022-23 and 2023-24:
Original Annual Amortisation = (₹10,00,000 - ₹0) / 10 years = ₹1,00,000 per year

• Amortisation for year ended 31st March 2023 = ₹1,00,000
• Amortisation for year ended 31st March 2024 = ₹1,00,000

(b) Carrying Amount as on 1st April 2025 (before revision):
Original Cost = ₹10,00,000
Less: Accumulated Amortisation (2 years x ₹1,00,000) = ₹2,00,000
Carrying Amount at 1st April 2025 = ₹8,00,000

(c) Amortisation for the year ended 31st March 2026 (after revision):
As per Ind AS 8, a change in useful life is a change in accounting estimate and is applied prospectively.

Carrying Amount at 1st April 2025 = ₹8,00,000
Revised Remaining Useful Life = 3 years
Revised Residual Value = Nil

New Annual Amortisation = (Carrying Amount - Revised Residual Value) / Revised Remaining Useful Life
New Annual Amortisation = (₹8,00,000 - ₹0) / 3 = ₹2,66,667 (rounded)

Journal Entry for Amortisation (31st March 2026):
Amortisation Expense A/c Dr. ₹2,66,667
To Accumulated Amortisation A/c ₹2,66,667
(Being amortisation charged on patent for the year after revision of useful life)

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Key Takeaways

• Ind AS 38 provides comprehensive guidance on recognition, measurement, amortisation, and disclosure of intangible assets.
• An intangible asset must be identifiable, controlled, and expected to generate future economic benefits to be recognised.
• Strict criteria apply to internally generated intangibles, especially the distinction between expensed research and capitalised development (PIRATE criteria).
• Intangibles can have finite or indefinite useful lives, dictating whether they are amortised or impairment tested annually.
• The revaluation model is rarely applicable due to the absence of active markets for most intangibles.
• Always consider Ind AS 36 (Impairment of Assets) in conjunction with Ind AS 38.

Frequently Asked Questions (FAQs)

Q: What are the recognition criteria for an intangible asset under Ind AS 38?
A: An intangible asset is recognised if it is probable that future economic benefits attributable to the asset will flow to the entity and the cost of the asset can be measured reliably.

Q: When can development costs be capitalised as per Ind AS 38?
A: Development costs can be capitalised if all six 'PIRATE' criteria are met: Probable future economic benefits, Intention to complete, Resources to complete, Ability to use/sell, Technical feasibility, and Expenditure reliably measurable.

Q: Are internally generated brands recognised as intangible assets under Ind AS 38?
A: No, internally generated brands, mastheads, publishing titles, customer lists, and similar items shall not be recognised as intangible assets because their cost cannot be reliably distinguished from the cost of developing the business as a whole.

Q: What is the maximum useful life for an intangible asset under Ind AS 38?
A: Ind AS 38 does not prescribe a maximum useful life. It requires an entity to assess the useful life as finite or indefinite. If finite, it is amortised over that period. If indefinite, it is not amortised but impairment tested annually.

Q: How is an intangible asset acquired in a business combination initially measured?
A: It is measured initially at its fair value at the acquisition date, as per Ind AS 103 (Business Combinations) and Ind AS 38.

References & Further Reading

• Ind AS 38 – Intangible Assets (ICAI)
• Ind AS 103 – Business Combinations (ICAI)
• Ind AS 36 – Impairment of Assets (ICAI)
• Ind AS 8 – Accounting Policies, Changes in Accounting Estimates and Errors (ICAI)
• ICAI Study Material / RTPs for CA Final Financial Reporting

Last Updated: July 2024 | Prepared by Kartavvya CA Expert Team (aligned with latest ICAI syllabus & Ind-AS)

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