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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Rohini Ltd purchased a customer database from another firm for Rs 25 lakh and paid Rs 1 lakh as non-refundable transfer taxes and Rs 2 lakh in legal fees to complete the purchase. It also incurred Rs 1.5 lakh on staff training to use it. What is the cost at which the database is initially recognised?

The database is recognised at Rs 28 lakh. Cost comprises the purchase price of Rs 25 lakh plus non-refundable transfer taxes of Rs 1 lakh and legal fees of Rs 2 lakh. Staff training cost is not directly attributable to bringing the asset into use and is expensed.

  1. ARs 25 lakh
  2. BRs 26 lakh
  3. CRs 28 lakhCorrect
  4. DRs 29.5 lakh

Explanation

The cost of a separately acquired intangible includes the purchase price, non-refundable duties and directly attributable costs such as legal fees: 25 + 1 + 2 = Rs 28 lakh. Training costs are not directly attributable and are expensed. Rs 29.5 lakh wrongly includes them.

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