CA Inter P1 · Chapter 3 · Question 14 of 16
Case: Prism Biotech Ltd incurred the following on a new vaccine project during the year: research phase ₹4,00,000; development phase before the AS 26 recognition criteria were met ₹2,00,000; development phase after all recognition criteria were demonstrated ₹6,00,000. The amount to be recognised as an intangible asset is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) ₹6,00,000
Explanation
AS 26 requires all research expenditure to be expensed. Development expenditure is capitalised only from the date all the recognition criteria (technical feasibility, intention and ability to complete, future benefits, adequate resources, reliable measurement) are met. Expenditure already expensed (here ₹2,00,000) cannot be reinstated as part of the asset later. Hence only ₹6,00,000 is capitalised.
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