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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Narmada Infotech Ltd acquired a patent on 1 April 2022 for ₹48 lakh and amortised it on the straight-line method over an estimated useful life of 8 years with nil residual value. On 1 April 2025, the management reassessed the remaining useful life as 4 years. What should be the amortisation charge for the year 2025-26?

The charge is ₹7.5 lakh. After three years of amortisation at ₹6 lakh, the carrying amount is ₹30 lakh. Since a revised useful life is a change in estimate, the unamortised amount is spread prospectively over the remaining four years, giving ₹30 lakh divided by 4.

  1. A₹6.0 lakh
  2. B₹7.5 lakhCorrect
  3. C₹12.0 lakh
  4. D₹3.75 lakh

Explanation

Annual amortisation originally was 48/8 = ₹6 lakh, so accumulated amortisation for 3 years is ₹18 lakh and the carrying amount is ₹30 lakh. A revision of useful life is a change in estimate and is applied prospectively over the remaining life: 30/4 = ₹7.5 lakh. Continuing ₹6 lakh ignores the revision.

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