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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Veda Pharma Ltd. spent ₹40 lakh during 2025-26 on a research phase to find a new drug formulation. In the same year it spent ₹25 lakh on an internal website's advertising pages and ₹10 lakh on staff training for a new software. Under AS 26, what total amount should be recognised as an expense in 2025-26, assuming none of these items qualifies for capitalisation?

The total expense is ₹75 lakh. Under AS 26, research costs, advertising and promotional costs, and staff training costs are all recognised as expenses when incurred, so ₹40 lakh, ₹25 lakh and ₹10 lakh are added together.

  1. A₹40 lakh
  2. B₹65 lakh
  3. C₹75 lakhCorrect
  4. D₹35 lakh

Explanation

Research expenditure (₹40 lakh) is always expensed. Advertising/promotional expenditure (₹25 lakh) and training costs (₹10 lakh) are also expensed as incurred and cannot be capitalised. Total = 40 + 25 + 10 = ₹75 lakh. ₹65 lakh wrongly omits training costs.

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