Final answer:
Determining the useful life of an intangible asset involves evaluating factors such as expected use, economic life of related assets, legal or regulatory limits, market obsolescence, and industry stability. These factors may lead to an indefinite useful life for certain intangibles like trademarks, or a finite one for software or patents. Regular review of the estimated useful life is necessary for accuracy and alignment with current conditions.
Step-by-step explanation:
The factors that should be considered in determining the useful life of an intangible asset include the expected use of the asset by the entity, the expected economic life of another asset or a group of assets to which the useful life of the intangible asset may be related, any legal, regulatory, or contractual provisions that may limit the useful life, any obsolescence that might be caused by changes in market demand or other economic factors, and the stability of the industry in which the asset operates.
For example, certain intangibles such as trademarks or domain names might have an indefinite useful life as long as they continue to be maintained and are relevant in the market. In contrast, other intangibles like software or patents typically have a finite useful life, because they are prone to becoming obsolete due to technological advancements or they may be tied to a fixed period of legal protection.
However, it's important to remember that the evaluation of an intangible asset's useful life is based on estimates and assumptions, which need to be reviewed regularly as circumstances change. This process ensures that the useful life assessment remains accurate and aligned with the current conditions affecting the asset.