Which statement about amortization and impairment for intangibles is true?

Which statement about amortization and impairment for intangibles is true?

• A. Finite life intangibles are amortized; indefinite life intangibles are tested annually for impairment.
• B. Finite life intangibles are tested annually for impairment; indefinite life intangibles are amortized.
• C. Both finite and indefinite life intangibles are amortized.
• D. Indefinite life intangibles are never tested for impairment.

Answer: (B)

Understanding how amortization and impairment apply to intangibles depends on whether the asset’s life is finite or indefinite. Finite-life intangibles are amortized over their useful life, reducing their carrying amount systematically. Impairment for finite-life assets is assessed if there are indicators that the asset may be recoverable, not automatically every year. Indefinite-life intangibles are not amortized because they don’t have a defined finite period of consumption. Instead, they must be tested for impairment at least annually to ensure their carrying amount isn’t overstated, with additional impairment testing if indicators arise. So the true statement aligns with finite-life intangibles being amortized and indefinite-life intangibles undergoing annual impairment testing. The other options mix up who gets amortized versus who gets impairment testing, or claim impairment tests don’t apply to indefinite-life assets, which isn’t correct.

Understanding how amortization and impairment apply to intangibles depends on whether the asset’s life is finite or indefinite. Finite-life intangibles are amortized over their useful life, reducing their carrying amount systematically. Impairment for finite-life assets is assessed if there are indicators that the asset may be recoverable, not automatically every year. Indefinite-life intangibles are not amortized because they don’t have a defined finite period of consumption. Instead, they must be tested for impairment at least annually to ensure their carrying amount isn’t overstated, with additional impairment testing if indicators arise.

So the true statement aligns with finite-life intangibles being amortized and indefinite-life intangibles undergoing annual impairment testing. The other options mix up who gets amortized versus who gets impairment testing, or claim impairment tests don’t apply to indefinite-life assets, which isn’t correct.