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CA Intermediate · Advanced Accounting · Introduction to Accounting Standards

Sundaram Foods Ltd. is a Non-SMC with turnover of ₹600 crore. It acquired a trademark for ₹90 lakh on 1 April and intends to retain it for use. A consultant states that, since the Accounting Standards are mandatory for the company, the trademark must be accounted for under which standard, and what is the annual amortisation if the useful life is taken as 10 years with nil residual value?

The trademark is an intangible asset, so AS 26 applies. With a cost of ₹90 lakh, ten-year useful life and nil residual value, straight-line amortisation is ₹9 lakh per year, and AS 10 does not apply because it covers tangible assets.

  1. AAS 26; ₹9 lakh per yearCorrect
  2. BAS 10; ₹9 lakh per year
  3. CAS 26; ₹90 lakh in the first year
  4. DAS 28; ₹9 lakh per year

Explanation

A trademark is an identifiable non-monetary asset without physical substance, so it is an intangible asset covered by AS 26, not AS 10 (tangible PPE). Amortisation on straight-line basis over useful life = 90 lakh ÷ 10 = ₹9 lakh per year. AS 28 deals with impairment, not initial amortisation, and full write-off in year one is wrong.

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