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CA Intermediate · Advanced Accounting · AS 26 Intangible Assets

Which of the following expenditures incurred by Gupta Textiles Ltd should be recognised as an expense when incurred rather than as an intangible asset under AS 26?

Expenditure on an internally generated brand is expensed. AS 26 does not allow internally generated brands, mastheads, publishing titles and customer lists to be recognised as intangible assets, whereas separately purchased patents and licences and directly attributable registration costs are capitalised.

  1. APurchase price of a patent acquired from an outside party
  2. BCost of a software licence bought separately for use in production
  3. CExpenditure on an internally generated brandCorrect
  4. DLegal fees to register a purchased trademark

Explanation

AS 26 prohibits recognising internally generated brands, mastheads, customer lists and similar items as assets. The other items are costs of separately acquired identifiable assets or directly attributable costs, and are capitalised.

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