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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Ishaan Ltd acquired a patent on 1 April 2023 for Rs 80 lakh, with a useful life of 8 years and no residual value, amortised straight-line. On 31 March 2026, an impairment review shows the recoverable amount is Rs 30 lakh. After recognising the impairment, the company continues to amortise the asset over the remaining life. What is the amortisation charge for 2026-27?

The charge for 2026-27 is Rs 6 lakh. After three years the carrying amount is Rs 50 lakh, which is written down to the recoverable amount of Rs 30 lakh. This revised amount is amortised over the remaining five years of life.

  1. ARs 6 lakhCorrect
  2. BRs 10 lakh
  3. CRs 7.5 lakh
  4. DRs 16 lakh

Explanation

Annual amortisation is Rs 10 lakh; after 3 years accumulated amortisation is Rs 30 lakh, so the carrying amount is Rs 50 lakh. The impairment loss is Rs 20 lakh, reducing the carrying amount to Rs 30 lakh. The remaining life is 5 years, so the charge is 30/5 = Rs 6 lakh. Rs 10 lakh ignores the impairment.

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