Expected manner of recovery of intangible assets with indefinite useful lives — Agenda paper 3

Background

The IC received a request to clarify how an entity determines the expected manner of recovery when measuring deferred tax for an intangible asset with an indefinite useful life. The IC discussed this issue in May 2016 (AP 10) and issued a tentative decision in July 2016 not to add the item to its agenda.

The purpose of this session was to ask the IC to finalise the agenda decision, the proposed wording for which was set out in Appendix A.

Staff analysis on comment letters received

All respondents agreed with the tentative agenda decision. However, one respondent believed that the agenda decision should not prohibit an entity from applying IAS 12.51B by analogy to intangible assets with indefinite useful lives. This respondent believed that there is no foreseeable limit to the period over which an intangible asset with an indefinite useful life or a non-depreciable tangible asset can generate cash flows. Therefore, it may be argued that neither asset is consumed through use in generating future economic benefits. The Staff pointed out that the IC has already discussed this issue in May 2016 at which time the IC concluded that an intangible asset with an indefinite useful life is not a non-depreciable asset. Accordingly, the IC noted then that IAS 12.51 and 51A are applicable, and that it would not be appropriate to apply IAS 12.51B by analogy.

Staff recommendations

The Staff recommended that the IC finalise the agenda decision.

Discussion

The IC approved the Staff’s recommendation.