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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Pragati Ltd. incurred the following during the year: ₹8 lakh on an advertising campaign for existing products, ₹6 lakh on staff training, ₹15 lakh on internally generated brand development, and ₹10 lakh on purchase of a trademark from another company. As per AS 26, the amount that can be capitalised as intangible assets is:

Only ₹10 lakh can be capitalised, being the purchased trademark. Advertising, staff training and internally generated brands are expensed when incurred because AS 26 prohibits recognising them as assets, as their cost cannot be separated from developing the business as a whole.

  1. A₹10 lakhCorrect
  2. B₹25 lakh
  3. C₹31 lakh
  4. D₹39 lakh

Explanation

Advertising, training and internally generated brands are expensed as incurred under AS 26 as they cannot be distinguished from the cost of developing the business as a whole. Only the purchased trademark of ₹10 lakh meets recognition criteria. Option ₹25 lakh wrongly capitalises the internal brand.

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