How is an intangible asset recorded if it has a finite economic life?

An intangible asset with a finite economic life is amortized over its economic life. This means that the cost of the asset is spread out over its useful life, reflecting the consumption of its value over time. This process allows for the systematic allocation of its value as an expense on the income statement, thereby matching costs with the revenues they help generate during the periods they are used.

This approach is in line with accounting principles that require recognition of expenses in the same period as the revenues they generate, facilitating a clear understanding of an entity's financial performance. Amortization reflects the gradual decline in value of the intangible asset as it is utilized within a business.

Intangible assets with indefinite lives, on the other hand, are not amortized but are instead tested for impairment annually. Other options do not accurately reflect the treatment of intangible assets with finite lives in accounting standards.