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License renewable every 5 years for an idefinite period
A) at nominal cost
B) at material cost
How would amortizations and renewal cost be treated in these cases?
Hi,
If the license is renewable at a nominal cost then the assumption would be that it would be renewed every fie year. We would therefore hold the license indefinitely and instead of amortising it we would perform annual impairment reviews.
If the license is renewable at a material cost then there is no assumption that it would be renewed so it would be amorised over its five year life. If it is then renewed then the new cost is capitalised and once again amortised. Don’t forget that it any impairment indicators arise during those five years then an impairment review would be carried out.
Hope that clears up any confusion.
Thanks
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