AASB 138 - Intangible Assets - July 2004
Example 6 An acquired airline route authExample 6 An acquired airline route authority between two European cities that expires in three years
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Example 6 An acquired airline route authority between two European cities that expires in three years
The route authority may be renewed every five years, and the acquiring entity intends to comply with the applicable rules and regulations surrounding renewal. Route authority renewals are routinely granted at a minimal cost and historically have been renewed when the airline has complied with the applicable rules and regulations. The acquiring entity expects to provide service indefinitely between the two cities from its hub airports and expects that the related supporting infrastructure (airport gates, slots, and terminal facility leases) will remain in place at those airports for as long as it has the route authority. An analysis of demand and cash flows supports those assumptions.
Because the facts and circumstances support the acquiring entity’s ability to continue providing air service indefinitely between the two cities, the intangible asset related to the route authority is treated as having an indefinite useful life. Therefore, the route authority would not be amortised until its useful life is determined to be finite. It would be tested for impairment in accordance with AASB 136 annually and whenever there is an indication that it may be impaired.