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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Sagar Foods Ltd spent Rs 25 lakh on an advertising campaign to launch a new brand and Rs 8 lakh on staff training for the launch. It also paid Rs 40 lakh to purchase a registered trademark from another firm. What total amount is recognised as an intangible asset?

Only Rs 40 lakh is recognised. The purchased trademark is an identifiable asset with a measurable cost. Advertising, promotional and staff training expenditure cannot be recognised as intangible assets under AS 26 and is charged to profit and loss when incurred.

  1. ARs 73 lakh
  2. BRs 48 lakh
  3. CRs 65 lakh
  4. DRs 40 lakhCorrect

Explanation

Purchased trademark of Rs 40 lakh meets the recognition criteria. Advertising and training costs are expensed when incurred. Rs 48 lakh adds training; Rs 65 lakh adds advertising; Rs 73 lakh adds both wrongly.

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