Testing Intangible Assets with Indefinite Useful Lives for Impairment

question 63

Multiple Choice

Testing intangible assets with indefinite useful lives for impairment:

• A) occurs every year.
• B) occurs when only there has been an indication of an impairment in the value of the asset such as a reduction in cash flow generation, idle assets, etc.
• C) never occurs because the asset has an indefinite useful life.
• D) occurs whenever required by the company's auditors.

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Definitions:

Depreciation

A method in accounting that spreads the expense of a tangible asset across its lifespan.

Useful Services

Refers to the benefits or utilities that consumers receive from a product or service, contributing to its value in fulfilling particular needs.

Insurance Policy

An insurance policy is a contract between an insurer and the policyholder, detailing the terms under which the insurer agrees to compensate the policyholder for specific losses or damages covered by the policy.

Adjusting Entry

An entry made in the books at the end of an accounting period to allocate income and expenditures to the appropriate period.