Question

A purchased limited-life intangible asset ________ amortized and is impairment tested using ________. (a)is; the recoverability test and then the fair value test.(b)is not; the fair value test only.(c)is not; the recoverability test and then the fair value test.(d)is; the fair value only.

Answer 1

Answer: Option A

Explanation: Assets having no physical existence are called intangible assets for example :- goodwill, patent rights.

Amortization can be defined as the method of distributing the value of intangible assets over its useful life, thus for amortization the asset must have a definite life.

While amortizing , first its recoverability is evaluated by comparing fair value with carrying value and after that the difference in both is calculated.