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AS 26: Intangible Assets

A professional application note for accounts teams: what the standard controls, where it appears in company accounting, how to apply it and what evidence reviewers expect. Animated notes with Play, Pause, Replay, English and Hindi voice options are included below.

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AS 26: Intangible Assets: interactive explanation

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Professional scope: This is an implementation-oriented explanation for accountants, finance managers, controllers and reviewers responsible for company accounts.

1. What this standard controls

An identifiable non-monetary asset without physical substance is recognised only when control, probable future benefits and reliable measurement criteria are met.

Current position: Included in the ICAI Accounting Standards framework, subject to entity applicability, notified rules and later amendments.

2. Where it appears in the real accounting world

01Software development and implementation
02Brands, licences and customer-related rights
03Research and development projects
04Useful life, amortisation and impairment

3. Practical application workflow

  1. Confirm identifiability and control.
  2. Distinguish purchased assets from internally generated expenditure.
  3. Separate research from qualifying development.
  4. Capitalise only directly attributable costs from the recognition date.
  5. Determine useful life, amortise and review impairment.

4. Real-world application example

An internal software project meets technical feasibility, intention, resources and benefit criteria from an approved stage-gate date. Only qualifying costs incurred after that date are capitalised; earlier investigation costs remain expensed.

5. Journal-entry and accounting record pattern

PurchaseDr Intangible asset / Cr Bank or payable.
Qualifying developmentDr Intangible asset under development / Cr Payroll/vendor payable.
AmortisationDr Amortisation expense / Cr Accumulated amortisation.

Entry wording is illustrative. Actual accounts, tax effects, dimensions and narration depend on the entity’s chart of accounts and facts.

6. Month-end and year-end control file

Controls to operate

  • Intangible project register.
  • Recognition-criteria approval memo.
  • Direct-cost time and invoice mapping.
  • Ready-for-use certification.
  • Useful-life and impairment review.

Common errors and red flags

  • Capitalising advertising, training or start-up costs.
  • Capitalising from project inception.
  • Recognising internally generated brands without basis.
  • No separation of maintenance and development.
  • Ignoring impairment indicators.

7. Reviewer questions

  1. Is the resource identifiable and controlled?
  2. When were recognition criteria first met?
  3. Which costs are directly attributable?
  4. When was the asset available for use?
  5. What evidence supports useful life and recoverability?

Related standards: AS 5, AS 8, AS 16, AS 28

Authoritative reference:

Before approving a material conclusion, check the latest ICAI compendium, notified Companies (Accounting Standards) Rules, entity applicability and subsequent amendments.

ICAI Accounting Standards Compendium →
Companies (Accounting Standards) Rules and amendments →

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Professional note: This educational resource does not replace entity-specific analysis, the latest notified standard, law, regulation, audit judgment or professional advice.