Skip to content

CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Tara Software Ltd spent the following in 2025-26 on an internally generated software product: Rs 5 lakh on staff training, Rs 9 lakh on advertising for its launch, Rs 14 lakh on development after meeting all AS 26 criteria, and Rs 3 lakh on initial operating losses before the product reached planned performance. What amount can be capitalised as the cost of the intangible asset?

Only Rs 14 lakh can be capitalised. AS 26 requires training costs, advertising and promotional costs, and initial operating losses to be expensed as incurred, so only the directly attributable development expenditure after the recognition criteria were met forms the cost of the asset.

  1. ARs 31 lakh
  2. BRs 14 lakhCorrect
  3. CRs 17 lakh
  4. DRs 23 lakh

Explanation

Training, advertising and initial operating losses are expressly excluded from the cost of an internally generated intangible asset and are expensed. Only the Rs 14 lakh development cost after criteria were met is capitalised. Rs 17 lakh wrongly adds the operating losses.

Did you get it right without looking?

One question tells you little. A timed set on AS 26 Intangible Assets shows your real accuracy, how long you take and where you lose marks.

Practise AS 26 Intangible AssetsFree diagnostic mock

More AS 26 Intangible Assets questions