Final answer:
Intangible assets with unlimited lives cannot be amortized and are subject to impairment tests instead.
Step-by-step explanation:
Intangible assets that have unlimited lives cannot be amortized. Amortization refers to the systematic allocation of the cost of an intangible asset over its useful life. However, for intangible assets with unlimited lives, there is no predetermined useful life, so amortization cannot be applied.Instead of amortization, these intangible assets are subject to an impairment test. The test is conducted periodically to determine if there has been a decline in the asset's value. If an impairment is identified, the asset's carrying amount is reduced to its fair value, resulting in a loss.For example, goodwill is an intangible asset with an indefinite life. It represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Goodwill is not subject to amortization but is tested for impairment annually or whenever there are indications of impairment.