Like all assets a useful life must be determined.
Intagible assets are written down over there useful life. this is simular to depreciation but for intangible assets is called amortisation, it beguins when an asset is ready for use.
The amortisation method should reflect the pattern in which the asset benefits the entity, if this is difficult then a straight line method should be used.
The residual value of an intangible asset is usually zero unless:
- There is a commitment by a third party to purchase the asset
- there is an active market value and a residual value that can be determined.
The method of amortisation should be reviewed every year, the asset must be tested annually for impairment. If the asset has an indefinate life it shall not be amortised.
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