Skip to content

CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Kaveri Pharma Ltd incurred Rs 18 lakh on a research phase of a new drug formulation and Rs 30 lakh on the development phase after all AS 26 recognition criteria were met. How much should be capitalised as an intangible asset?

Rs 30 lakh is capitalised. Under AS 26, research phase expenditure is recognised as an expense when incurred, while development expenditure is capitalised once the recognition criteria are demonstrated. The Rs 18 lakh research cost is therefore charged to profit and loss.

  1. ARs 48 lakh
  2. BRs 30 lakhCorrect
  3. CRs 18 lakh
  4. DNil

Explanation

Research phase expenditure is always expensed when incurred. Only development expenditure incurred after the criteria are demonstrated is capitalised, so Rs 30 lakh is capitalised. Rs 48 lakh wrongly capitalises research cost as well.

Did you get it right without looking?

One question tells you little. A timed set on AS 26 Intangible Assets shows your real accuracy, how long you take and where you lose marks.

Practise AS 26 Intangible AssetsFree diagnostic mock

More AS 26 Intangible Assets questions