Spectrum licences: accounting under IFRS

Spectrum is often an operator's largest intangible asset, and auctions for 5G frequencies cost billions. How the licence is measured, when amortisation starts and how long it runs all affect reported profit for decades. This guide works through a 5G licence from auction to amortisation, and explains the US GAAP difference.

By Awais Jameel, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. 3 minute read.

Short answer

Spectrum licences are intangible assets under IAS 38, measured at cost, which includes the present value of any deferred payments to the regulator. Amortisation starts when the spectrum is available for use, normally when the network using it is ready, not when the licence is won, and runs straight-line over the remaining licence term. In this guide's example, a licence costing 300 upfront plus three annual instalments of 300 is recognised at 1,101.9 million and amortised at about 59.6 million a year from launch. US GAAP operators often treat licences as indefinite-lived instead.

At a glance

Standard
IAS 38 Intangible Assets
Measured at
Cost, including PV of deferred payments
Amortisation starts
When available for use
Amortisation period
Remaining licence term
Renewals
Included only if near-certain and cheap
US GAAP
Often indefinite-lived
Spectrum licences: accounting under IFRSStandard: IAS 38 Intangible Assets; Measured at: Cost, including PV of deferred payments; Amortisation starts: When available for use; Amortisation period: Remaining licence term; Renewals: Included only if near-certain and cheap; US GAAP: Often indefinite-lived.KEY FACTS AT A GLANCESpectrum licences: accounting under IFRSStandardIAS 38 Intangible AssetsMeasured atCost, including PV ofdeferred paymentsAmortisation startsWhen available for useAmortisation periodRemaining licence termRenewalsIncluded only ifnear-certain and cheapUS GAAPOften indefinite-livedTax BakersSpectrum licences: accounting under IFRSStandard: IAS 38 Intangible Assets; Measured at: Cost, including PV of deferred payments; Amortisation starts: When available for use; Amortisation period: Remaining licence term; Renewals: Included only if near-certain and cheap; US GAAP: Often indefinite-lived.KEY FACTS AT A GLANCESpectrum licences: accountingunder IFRSStandardIAS 38 Intangible AssetsMeasured atCost, including PV of deferred paymentsAmortisation startsWhen available for useAmortisation periodRemaining licence termRenewalsIncluded only if near-certain and cheapUS GAAPOften indefinite-livedTax Bakers
Key facts at a glance, as set out in this guide.

How are spectrum licences accounted for, step by step?

A spectrum licence from auction to amortisationA spectrum licence from auction to amortisation1Win theAuction oraward2RecogniseCost, incl. PVof instalments3BuildNo amortisationyet4LaunchNetwork readyfor use5AmortiseOver the restof the term
Amortisation waits until the network is ready to use the spectrum.

A 5G spectrum licence example

An operator wins a 20-year 5G licence for CU 1,200 million: 300 million on award and 300 million at the end of each of the next three years, with no interest charged. Its incremental borrowing rate is 6%. The network using the spectrum launches 1.5 years after the award.

StepCU million
Upfront payment300.0
Present value of three instalments of 300 at 6%801.9
Cost of the licence1,101.9
Remaining term at launch: 20 - 1.5 years18.5 years
Annual amortisation from launch59.6

The deferred instalments are a financial liability of 801.9 million at award, unwinding through interest expense. The 98.1 million difference between the nominal price and the cost is interest, not part of the licence. No amortisation is charged during the 1.5-year build period, although the licence is tested for impairment if there are indicators.

When does amortisation start?

When the asset is available for use, meaning it is in the location and condition necessary for it to operate as management intends. For spectrum, that is usually when the network equipment using the frequencies is ready to carry traffic, which can be months or years after the auction. If spectrum is brought into use in stages, region by region, some operators start amortisation in stages too.

What useful life is used?

The remaining licence term, unless the operator has evidence that renewal is near-certain at insignificant cost, in which case IAS 38 allows the renewal period to be included. Because renewals usually require a new auction or a substantial fee, most IFRS operators amortise over the licence term only.

Can borrowing costs be capitalised?

A licence on its own is not usually a qualifying asset, but where it forms part of a network that takes a substantial period to build, borrowing costs may be capitalised as part of that qualifying asset. Practice varies between operators, and the policy should be applied consistently and disclosed.

How does US GAAP treat spectrum licences?

Many US operators classify wireless licences as indefinite-lived intangible assets under ASC 350, because licences are routinely renewed at nominal cost and there is no legal, regulatory or technological limit on their use. They are not amortised but tested for impairment at least annually. The same licence can therefore be amortised over 20 years by an IFRS operator and carry no amortisation at a US peer, a large difference in reported earnings.

What happens when spectrum is refarmed or swapped?

Operators often move existing spectrum from an old technology to a newer one, such as using 2G frequencies for 4G or 5G. Refarming does not create a new asset, but the change in use is a reason to review the licence's useful life and test it for impairment. Exchanges of spectrum between operators are measured at fair value if the exchange has commercial substance, with a gain or loss on the licence given up.

How are spectrum licences tested for impairment?

As part of the cash-generating unit, usually the national mobile network, because spectrum does not generate cash flows on its own. Falling prices, a failed technology roll-out or regulatory changes can trigger a test. See cash-generating units, IAS 38 explained and telecom accounting.

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Questions people ask

How are spectrum licences accounted for under IFRS?

As intangible assets under IAS 38, at cost including the present value of deferred payments, amortised over the remaining licence term from when the spectrum is available for use.

When does amortisation of a spectrum licence start?

When the spectrum is available for use, usually when the network using it is ready, not when the licence is won.

Are spectrum licences amortised under US GAAP?

Often not. Many US operators treat them as indefinite-lived and test them annually for impairment.

How are deferred spectrum payments treated?

They are a financial liability measured at present value; the difference from the nominal price is interest expense, not licence cost.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IAS 38 Intangible Assets

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

TelecomTelecom accounting: the key IFRS issuesIAS 38IAS 38 intangible assets explainedIAS 36Cash-generating units and corporate assets

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This guide is general information. It is not tax or legal advice for your situation.