Honey Ltd. is in the process of developing a new production method. During the financial year ended 31st March, 2023, total expenditure incurred on…

CA Intermediate · Advanced Accounting · MTP · January 2025
Honey Ltd. is in the process of developing a new production method. During the financial year ended 31st March, 2023, total expenditure incurred on development of this production method was - 98,00,000. On 1st Jan, 2023, the production method met the criteria as an intangible asset and expenditure incurred till this date was - 68,00,000. Further expenditure incurred on the new method was - 72,00,000 for the year ended 31st March, 2024 and recoverable amount of the know how embodied in the new method for this financial year is 52,00,000. You are required to calculate: The carrying amount of the Intangible asset on 31st March, 2023.The expenditure to be shown in Statement of Profit and Loss for the year ended 31st March, 2024.The carrying amount of the Intangible asset on 31st March, 2024.

Suggested Answer and Working Notes:

As per AS 26 ‘Intangible Assets' (i) Carrying value of intangible asset as on 31.03.2023 At the end of financial year, on 31st March 2023, the production process will be recognized (i.e. carrying amount) as an intangible asset at a cost of 30 (98-68) lacs (expenditure incurred since the date the recognition criteria were met, i.e., from 1st January, 2023). (ii) Expenditure to be charged to Profit and Loss account for the year ended 31.03.2024 (₹ in lacs) Carrying Amount as on 31.03.2023 30 Expenditure during 2023–2024 72 Book Value 102 Recoverable Amount (52) Impairment loss 50 50 lakhs to be charged to Profit and loss account for the year ending 31.03.2024. (iii) Carrying value of intangible asset as on 31.03.2024 (₹ in lacs) Book Value 102 Less: Impairment loss (50) Carrying amount as on 31.03.2024 52

Topics: AS 26

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