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Per AS 26 'Intangible Assets', what is the correct treatment for ₹18 lakhs spent on publicity and research for a failed consumer product?
ACapitalise as intangible asset and amortise over 5 years
BCapitalise as intangible asset and amortise over 10 years
CTreat as goodwill on the balance sheet
DCharge to Statement of Profit and Loss as expense
Answer & Solution
Correct answer: D. Charge to Statement of Profit and Loss as expense
1. Step 1: AS 26 prohibits recognition of internally-generated intangibles arising from research, advertising and promotional activities.
2. Step 2: Publicity / advertising spend is expensed as incurred.
3. Step 3: Hence ₹18 lakh is charged to the Statement of Profit and Loss in the year of incurrence.
_Source: ICAI BoS CA Inter Paper 1 Practice MCQ Paper (89270bos-aps3012-int-p1), Q.8_