Which of the following statements best describes the accounting treatment of Intangible Assets with indefinite lives?
A) All intangible assets are written down when their carrying values exceed their fair market values.
B) With the exception of Goodwill, all intangible assets are written down when their carrying values exceed their fair market values.
C) All intangible assets are written down when their carrying values exceed their undiscounted future cash flows.
D) The recoverable amount is determined and compared to the carrying amount. If the recoverable amount is greater than the carrying amount than no impairment exists; otherwise, there is an impairment and the asset is written down to its recoverable amount.

Question

Quizplus · Accepted Answer

The correct method for accounting for impairments of Intangible Assets with indefinite lives is to compare the asset's recoverable amount to its carrying amount. If the recoverable amount is greater than the carrying amount, then no impairment exists, and no write-down is necessary. However, if the recoverable amount is less than the carrying amount, then the asset is impaired, and the carrying amount should be written down to the recoverable amount. This method is applied to all intangible assets, including Goodwill.

Which of the Following Statements Best Describes the Accounting Treatment