Which of the following statements is true about amortization of intangible assets under U.S. GAAP?

• A. Indefinite-lived intangible assets are amortized over a maximum period of 40 years.
• B. All intangible assets, including goodwill, must be amortized using the straight-line method.
• C. Amortization increases the carrying amount of an intangible asset over time to reflect inflation.
• D. Finite-lived intangible assets are amortized over their estimated useful lives, generally using a systematic and rational method.

Answer: (D)

Verified step by step guidance

1. Understand the classification of intangible assets under U.S. GAAP: intangible assets are categorized as either finite-lived or indefinite-lived based on their expected useful life.
2. Recognize that finite-lived intangible assets are amortized over their estimated useful lives, which means their cost is systematically allocated as an expense over the period they provide economic benefits.
3. Know that indefinite-lived intangible assets, such as certain trademarks or goodwill, are not amortized because they do not have a foreseeable limit to their useful life; instead, they are tested annually for impairment.
4. Recall that amortization methods should be systematic and rational, with the straight-line method being the most common, but other methods can be used if they better reflect the pattern of economic benefits consumption.
5. Be aware that amortization decreases the carrying amount of the intangible asset over time, reflecting the consumption of the asset's economic benefits, and does not increase the carrying amount or adjust for inflation.