Under IFRS, how is impairment of intangible assets assessed?

Under IFRS, impairment of intangible assets is assessed by comparing the carrying value of the asset to its recoverable amount. The recoverable amount is defined as the higher of fair value less costs of disposal and value in use. This means that if the carrying amount of the intangible asset exceeds this recoverable amount, the asset is considered impaired, and an impairment loss must be recognized.

This method reflects a comprehensive evaluation of the asset's value by not only considering its current carrying amount but also assessing the potential to generate future cash flows (value in use) and its potential market value (fair value less costs of disposal). By utilizing this dual approach, IFRS aims to ensure that the intangible assets are not overstated on the balance sheet, providing a more realistic view of their value.

The other options may suggest methods of asset evaluation but do not align with IFRS guidelines. For example, merely comparing the carrying value to future cash flows alone does not account for the asset's fair value, nor does analyzing market prices adequately encompass all factors relevant to impairment, such as the specific usage of that intangible asset. Similarly, reviewing only historical cost overlooks changes in market conditions and the actual recovery potential of the asset, failing to truly measure the asset’s current value.