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Hi,
If you have a licence that you buy form the government for a period of 5 years. However, if you think that it is probable that the government will extend the licence at the end of the period free of charge what happens?
do you depreciate the asset over the 5 years, reassessing the UEL every year until you can determined that extension is certain? or do you include the additional years probable to be granted by the government? if the probable extension means that there is an indefinite useful life can you just reassess for impairment year year end.
will the extension be classed as a government grant under IAS 20?
Thanks in advance
Hi,
You would amortise over the five years and then you could look at the extension as a change in accounting estimate at the end of each reporting period and apply the new estimate to the carrying amount.
The extension is not in the form of a government grant as it does not meet the definition.
Thanks
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