How Many Years Amortize Intangible Assets?

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Solution

Intangible assets should be amortized based on its useful life. As per AS 26, the life of an intangible asset does not exceed 10 years. But, in some cases it can be more than 10 years.

Also read:

MCQs on Goodwill

Intangible Assets

Tangible Assets

Difference Between Assets and Liabilities

Methods of Valuation of Goodwill

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From the following particulars of Bharat Gas Limited, calculate Cash Flows from Investing Activities. Also, show the workings clearly preparing the ledger accounts:

Balance Sheet of Bharat Gas Ltd. as on 31 Mar. 2016 and 31 Mar. 2017
Particulars	Note No.	Figures as the end of 2017 (Rs)	Figures as at the end of reporting 2016 (Rs)
II) Assets
1. Non-current Assets
a) Fixed assets
i) Tangible assets	1	12,40,000	10,20,000
ii) Intangible assets	2	4,60,000	3,80,000
b) Non-current investments	3	3,60,000	2,60,000

Notes	1	Tangible assets = Machinery
	2	Intangible assets = Patents

Notes

	Figures of current year	Figures of previous year

1. Tangible Assets
Machinery	12,40,000	10,20,000
2. Intangible Assets
Goodwill	3,00,000	1,00,000
Patents	1,60,000	2,80,000
	4,60,000	3,80,000
3. Non-current Investments
10% long term investments	1,60,000	60,000
Investment in land	1,00,000	1,00,000
Shares of Amartex Ltd.	1,00,000	1,00,000
	3,60,000	2,60,000

Additional Information:

(a) Patents were written-off to the extent of Rs. 40,000 and some Patents were sold at a profit of Rs. 20,000.

(b) A Machine costing Rs. 1,40,000 (Depreciation provided thereon Rs. 60,000) was sold for Rs. 50,000. Depreciation charged during the year was Rs. 1,40,000.

(c) On March 31, 2016, 10% Investments were purchased for Rs. 1,80,000 and some Investments were sold at a profit of Rs. 20,000. Interest on Investment was received on March 31, 2017.

(d) Amartax Ltd. paid Dividend @ 10% on its shares.

(e) A plot of Land had been purchased for investment purposes and let out for commercial use and rent received Rs. 30,000.

Q. Under which major head and sub-head of the Assets part of the Balance Sheet will the following be shown:

(i) Intangible Assets; (ii) Intangible Assets under Development; (iii) Investments (more than 12 months); (iv) Deferred Tax Assets (Net); (v) Stores and Spares; and (vi) Loose Tools?

Q. ___________ method is normally recommended for amortization of intangible assets.

A company has to disclose depreciation provided on fixed assets and amortization of intangible assets under ___

Amortization of intangible assets and depletion of natural resources is conceptually similar to depreciation of constructed assets. Is the statement correct?

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