Finite or Indefinite Intangible: Do You Amortize It?
Classify the asset based on expected useful economic life, not simply its legal label.
Finite-lived intangible
A finite-lived intangible has a determinable useful economic life and is generally amortized over the appropriate period.
Indefinite-lived intangible
An indefinite-lived intangible has no foreseeable limit on the period it is expected to generate cash flows and generally is not amortized under the ordinary model.
Legal life vs useful life
A patent's legal life can exceed its expected economic usefulness, so legal life is not automatically the amortization period.
Renewal
Expected renewals can affect useful life when renewal is reasonably supportable under applicable guidance.
The takeaway
Finite-lived intangibles are amortized over their useful lives. Indefinite-lived intangibles generally are not amortized but require impairment evaluation.
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FAQ
Is goodwill a normal finite-lived intangible for public-company GAAP?
No.
Can a patent's useful life be shorter than its legal life?
Yes.
Does indefinite mean forever?
No.