Amortisation of an intangible asset
Begin amortisation when the asset is available for use. The method reflects the pattern of consumption of expected economic benefits; use straight-line if the pattern cannot be determined reliably. Review useful life, residual value and method as required. An indefinite-life intangible asset is not amortised but is tested for impairment annually and whenever indications require it. These requirements differ from a blanket rule that every intangible is amortised.
Worked example
A patent costs $120,000, has a six-year useful life and zero residual value. If straight-line consumption is appropriate, annual amortisation is $20,000 from the date it is available for use.
Common mistake
Amortising an indefinite-life intangible automatically, or beginning amortisation before the asset is available for use.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |