Brief Definition
Indefinite-life intangibles are non-physical assets that a company owns, which have no foreseeable limit to the period over which they are expected to generate economic benefits. Unlike finite-life intangibles, which are amortized over their useful lives, indefinite-life intangibles are not amortized but are instead tested annually for impairment.
Further Explanation
Indefinite-life intangibles are non-physical assets that a company owns, which have no foreseeable limit to the period over which they are expected to generate economic benefits. Unlike finite-life intangibles, which are amortized over their useful lives, indefinite-life intangibles are not amortized but are instead tested annually for impairment. Common examples include trademarks, brand names, and goodwill. These assets can retain their value indefinitely as long as they are maintained and not impaired.
Example:
A renowned beverage company owns a well-known brand name that has been popular for decades. This brand name is an indefinite-life intangible asset because there is no predictable end to its useful life. The brand continues to generate revenue and is expected to do so indefinitely. Each year, the company reviews the brand’s value to ensure it has not diminished (impaired) and makes adjustments if necessary.