CA Intermediate · Advanced Accounting · AS 26 Intangible Assets
Veda Pharma Ltd. incurred Rs 18 lakh on a research phase and Rs 30 lakh on a development phase for a new drug formulation during 2025-26. The Rs 30 lakh was incurred after all the AS 26 criteria for recognising an internally generated intangible were demonstrated. How much should be recognised as an intangible asset at year-end?
Rs 30 lakh is recognised as an intangible asset. Under AS 26, research phase expenditure is always charged to profit and loss, while development expenditure is capitalised once all recognition criteria are demonstrated. So only the development cost of Rs 30 lakh is capitalised.
- ARs 48 lakh
- BRs 30 lakhCorrect
- CRs 18 lakh
- DNil
Explanation
Research expenditure (Rs 18 lakh) is always expensed. Development expenditure of Rs 30 lakh incurred after the recognition criteria are met is capitalised. Capitalising Rs 48 lakh wrongly includes research cost.
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