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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Nirmal Pharma Ltd. acquired a patent on 1 April 2023 for Rs 50 lakh, amortised straight-line over 10 years with nil residual value. On 1 April 2025 the company revised the remaining useful life to 4 more years (that is, 6 years in total from acquisition) because of competing technology. What is the amortisation charge for the year ended 31 March 2026?

The charge is Rs 10 lakh. After two years at Rs 5 lakh each, the carrying amount is Rs 40 lakh. The revised useful life is a change in estimate, applied prospectively over the remaining 4 years, so Rs 40 lakh divided by 4 gives Rs 10 lakh with no restatement of earlier years.

  1. ARs 5 lakh
  2. BRs 10 lakhCorrect
  3. CRs 10 lakh for the year, with Rs 5 lakh of past amortisation also adjusted
  4. DRs 12 lakh

Explanation

Up to 31 March 2025 two years were amortised at Rs 5 lakh each, giving Rs 10 lakh. The carrying amount on 1 April 2025 is Rs 40 lakh. The change in estimate is applied prospectively over the remaining 4 years, so the charge is 40/4 = Rs 10 lakh. Past amortisation is not restated.

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