What type of intangible assets is included in the impairment test under both U.S. GAAP and IFRS?

• A. Only patents
• B. Goodwill and finite life intangibles
• C. Only trademarks
• D. Only software

Answer: (B)

The correct answer is that the impairment test includes goodwill and finite life intangibles under both U.S. GAAP and IFRS. Goodwill is recognized as an indefinite-lived intangible asset, and it undergoes a specific impairment testing process at least annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.

Finite life intangibles, such as patents, copyrights, and trademarks, are amortized over their useful lives and are also subject to impairment testing whenever there are indicators of potential impairment. Both sets of accounting standards require that the carrying amount of these intangible assets be compared to their recoverable amount, and if the carrying amount exceeds the recoverable amount, an impairment loss is recognized.

Other types of intangible assets mentioned in the other answer choices, such as only patents, only trademarks, or only software, are not comprehensive enough to reflect the types of intangible assets covered by the impairment test. Specifically, the focus on goodwill along with finite life intangibles adheres to the broader requirements set by both U.S. GAAP and IFRS regarding the recognition and measurement of impairment.