K Ltd. launched a project for producing product X in October, 2023. The Company incurred 40 lakhs towards Research and Development expenses upto…

As per AS 26 “Intangible Assets”, expenditure on research should be recognized as an expense when it is incurred. An intangible asset arising from development (or from the development phase of an internal project) should be recognized if, and only if, an enterprise can demonstrate all of the conditions specified in para 44 of the standard. An intangible asset (arising from development) should be derecognised when no future economic benefits are expected from its use according to para 87 of the standard. Thus, the manager cannot defer the expenditure write off to future years in the given case. Hence, the expenses amounting 40 lakhs incurred on the research and development project has to be written off in the current year ending 31st March, 2024.