Escolar Documentos
Profissional Documentos
Cultura Documentos
in/
AS 26
Intangible Assets
For - CA Final
By - A.B.Sonpal
Meaning
Intangible Asset is an identifiable Asset, without any physical substance of its own, non-monetary in
nature, held for production purpose or for renting services.
Identifiable Capable of being sold
Asset A resource owned by the entity which is capable of generating future economic benefit.
Intangible Asset should be recorded only if it has a cost to the entity
Non-monetary asset These are those asset whose realization is neither fixed nor determinable ( e.g.
debtors, B/R etc. )
Treatment of Storage Cost
Storage Cost refers to the cost of device in which the Intangible Asset is incorporated. If the Storage Cost
is immaterial then ignore such cost.
If the cost is material then we have to see whether such cost is separable or not, if such cost is separable
then record the Intangible and tangible item separately.
If such cost is inseparable then record that Asset that has been primarily acquired.
Cost of Intangible Asset bought under exchanged will be Fair value of the asset acquired or value of
the asset exchanged, whichever is lower.
Recognition criteria
Intangible Asset shall be recognized only
Assets which are non-monetary in nature acquire free of cost should be recorded at Nominal value.
xxx
xxx
xxx
xxx
xxx
Fair Value
400000
500000
300000
400000
Website
40000
Software
10000
Patent
50000
Creditors
100000
100000
700000
500000
400000
600000
500000
400000
100000
700000
100000
600000
100000
200000
1100000
500000
400000
40000
10000
50000
100000
1100000
If all the following conditions are met then we consider the beginning of development and the cost so
incurred shall be capitalized:
Administration expense
Selling and distribution expense
Staff training
Abnormal Loss
Amount to be capitalized should not exceed the future benefits available in totality from Intangible Asset
Advertisement exp
Start-up exp.
Relocation exp.
Preliminary exp.
Staff training
E.g Expenditure on know-how = Rs.50 lac. Production exp. met its criteria on 1/12/03. Expenditure
incurred till date (i.e. 1/12/03) 22 lac. Further exp. incurred 80 lac. Recoverable amount = 72 lac. Discuss
the treatment.
Solution
Expenditure to be charged to P/L = 22 lacs
Amount to be capitalized for the year 31/3/05 = 72 lac and impairment loss shall be (carrying amount
Recoverable amount) 108 72 = 36.
We would have capitalized 108 lac ( 28+80) but we know that amount to be capitalized should not
exceed the future benefits available from Intangible asset so we have capitalized 72 lac and balance
charged to P/L as impairment Loss ( 36 lac ).
Amortisation of Intangible Asset
Intangible Asset should be recorded at = Cost Accumulated Amortisation
Amortisation to be started when Asset ready for use
Depreciable Amount
Cost of Intangible Asset xxx
-
Residual Value
xxx
xx
Para 63
Life lower than above can also be taken. Life higher than that specified in para 63 can be taken but it
should not be infinite i.e. it should be finite and justifiable.
150000
105000
127500
150000
60000
Solution
Policy
Book Value
Para 63
Case A
Case B
10 yr
105000
105000
20yr
127500
105000
22500
Case C
150000
105000
45000
Case D
5 yr
60000
60000
-
Subsequent Expenditure
To be capitalized only
If life higher than that prescribed in para63 is taken then it should undergo impairment test to be
conducted at the end of every year.