(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009to use the asset. If the contractual or other legal rights are conveyed for a limitedterm that can be renewed, the useful life of the intangible asset shall include therenewal period(s) only if there is evidence to support renewal by the entitywithout significant cost.18.20 If an entity is unable to make a reliable estimate of the useful life of an intangibleasset, the life shall be presumed to be ten years.Amortisation period and amortisation method18.21 An entity shall allocate the depreciable amount of an intangible asset on asystematic basis over its useful life. The amortisation charge for each period shallbe recognised as an expense, unless another section of this IFRS requires the costto be recognised as part of the cost of an asset such as inventories or property,plant and equipment.18.22 Amortisation begins when the intangible asset is available for use, ie when it is inthe location and condition necessary for it to be usable in the manner intendedby management. Amortisation ceases when the asset is derecognised. The entityshall choose an amortisation method that reflects the pattern in which it expectsto consume the asset’s future economic benefits. If the entity cannot determinethat pattern reliably, it shall use the straight-line method.Residual value18.23 An entity shall assume that the residual value of an intangible asset is zero unless:(a)(b)there is a commitment by a third party to purchase the asset at the end ofits useful life, orthere is an active market for the asset and:(i)(ii)residual value can be determined by reference to that market, andit is probable that such a market will exist at the end of the asset’suseful life.Review of amortisation period and amortisation method18.24 Factors such as a change in how an intangible asset is used, technologicaladvancement, and changes in market prices may indicate that the residual valueor useful life of an intangible asset has changed since the most recent annualreporting date. If such indicators are present, an entity shall review its previousestimates and, if current expectations differ, amend the residual value,amortisation method or useful life. The entity shall account for the change inresidual value, amortisation method or useful life as a change in an accountingestimate in accordance with paragraphs 10.15–10.18.© IASCF 101