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ABC Ltd. acquires PQR Ltd. PQR holds an Ind AS 38 IPR&D pipeline with TWO drugs: drug 1 awaits regulatory approval (probable in 2 years); drug 2 has just received approval. The revenue potential of these drugs was the principal rationale for the deal. Identify the correct accounting:
ARecognise both drugs as separately identifiable intangibles at acquisition-date FV; subsequent costs follow Ind AS 38 paragraphs 54-62
BCapitalise both as PP&E (manufacturing facility)
CSubsume both into goodwill until approvals are in hand
DRecognise only the approved drug (drug 2); drug 1 is subsumed into goodwill
Answer & Solution
Correct answer: A. Recognise both drugs as separately identifiable intangibles at acquisition-date FV; subsequent costs follow Ind AS 38 paragraphs 54-62
Both qualify as identifiable intangibles — separable / arise from contractual or legal rights; Ind AS 38 deems recognition criteria met in a BC. FV reflects the probability of approval (drug 1) and the certainty of approval (drug 2). Subsequent expenditure follows Ind AS 38.
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