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ABSTRACT Accounting Standards are used as one of the main compulsory regulatory mechanisms for the preparation of general

purpose financial reports & subsequent audit of the same, in almost all countries of the world. Accounting Standards are concerned with the system of measurement & disclosure rules for the preparation & presentation of financial statements. They appear with a set of authoritative statements of how particular types of transactions, events & other costs should be recognized & reported in the financial statements. Accounting Standards are revised to furnish useful information to different users of financial statements such as shareholders, creditors, lenders, management, investors, suppliers, competitors, researchers, regulatory bodies & society at large & so on. In fact, such statements are designed & prescribed so as to improve & benchmar the quality of financial reporting. The Accounting Standards are very much important to understand since these are used to narrow the alternatives available to collect & present the financial reports. To formulate the accounting standards a committee at the international level called !International Accounting Standards "ommittee #IAS"$% has been established in the year &'(). All the accounting bodies all over the world are member of this committee. They formulate the accounting standards & these are mandatory for the company*s to be followed while preparing their financial reports. +n account of this standard #"I,-A$ "ompany is ta en as an e.ample to showcase how the accounting standard is followed for the preparation of its financial reports. The data regarding the same is collected from secondary sources.

INTRODUCTION: Objective: The ob/ective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifically in another Accounting Standard. This Standard requires an enterprise to recognize an intangible asset if, and only if, certain criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires certain disclosures about intangible assets. Scope: &. This Standard should be applied by all enterprises in accounting for intangible assets, e.cept0 #a$ Intangible assets that are covered by another Accounting Standard. #b$ 1inancial assets. #c$ 2ineral rights and e.penditure on the e.ploration for, or development and e.traction of minerals, oil, natural gas and similar non3regenerative resources and #d$ Intangible assets arising in insurance enterprises from contracts with policyholders. This Standard should not be applied to e.penditure in respect of termination benefits also. 4. If another Accounting Standard deals with a specific type of intangible asset, an enterprise applies that Accounting Standard instead of this Standard. 1or e.ample, this Statement does not apply to0 #a$ Intangible assets held by an enterprise for sale in the ordinary course of business. #b$ 5eferred ta. assets. #c$ -eases that fall within the scope of AS &', -eases6 and #d$ 7oodwill arising on an amalgamation and goodwill arising on consolidation. ). This Standard applies to, among other things, e.penditure on advertising, training, start3up, research and development activities. 8esearch and development activities are directed to the development of nowledge. Therefore, although these activities may result in an asset with physical substance #for e.ample, a prototype$, the physical element of the asset is secondary to its intangible component, that is the nowledge embodied in it. This Standard also applies to rights under licensing agreements for items such as motion picture films, video recordings, plays, manuscripts, patents and copyrights. 9. In the case of a finance lease, the underlying asset may be either tangible or intangible. After initial recognition, a lessee deals with an intangible asset held under a finance lease under this Standard.

:. ;.clusions from the scope of an Accounting Standard may occur if certain activities or transactions are so specialized that they give rise to accounting issues that may need to be dealt with in a different way. Such issues arise in the e.penditure on the e.ploration for, or development and e.traction of, oil, gas and mineral deposits in e.tractive industries and in the case of contracts between insurance enterprises and their policyholders. Therefore, this Standard does not apply to e.penditure on such activities. <owever, this Standard applies to other intangible assets used #such as computer software$, and other e.penditure #such as start3up costs$, in e.tractive industries or by insurance enterprises. Accounting issues of specialized nature also arise in respect of accounting for discount or premium relating to borrowings and ancillary costs incurred in connection with the arrangement of borrowings, share issue e.penses and discount allowed on the issue of shares. Accordingly, this Standard does not apply to such items also. Definitions The following terms are used in this Standard with the meanings specified0 An intangible asset is an identifiable non3monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. An asset is a resource0 controlled by an enterprise as a result of past events6 and 1rom which future economic benefits are e.pected to flow to the enterprise. 2onetary assets are money held and assets to be received in fi.ed or determinable amounts of money. =on3monetary assets are assets other than monetary assets. 8esearch is original and planned investigation underta en with the prospect of gaining new scientific or technical nowledge and understanding. 5evelopment is the application of research findings or other nowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of commercial production or use.

Amortization is the systematic allocation of the depreciable amount of an intangible asset over its useful life. 5epreciable amount is the cost of an asset less its residual value. >seful life is either0 the period of time over which an asset is e.pected to be used by the enterprise6 or The number of production or similar units e.pected to be obtained from the asset by the enterprise. 8esidual value is the amount which an enterprise e.pects to obtain for an asset at the end of its useful life after deducting the e.pected costs of disposal. 1air value of an asset is the amount for which that asset could be e.changed between nowledgeable, willing parties in an arm?s length transaction. An active mar et is a mar et where all the following conditions e.ist0 the items traded within the mar et are homogeneous6 willing buyers and sellers can normally be found at any time6 and ,rices are available to the public. An impairment loss is the amount by which the carrying amount of an asset e.ceeds its recoverable amount.

"arrying amount is the amount at which an asset is recognized in the balance sheet, net of any accumulated amortization and accumulated impairment losses thereon.

Fixed Assets Accounting view 1i.ed assets refers to those assets which are held for the purposes of providing or producing goods or services and those that are not be held for resale in the normal course of business. It may be classified as under0 &$ T ngib!e fixed ssets @

8efers to those fi.ed assets which can be seen and touched. 1or ;.g. -and & Auilding, ,lant & 2achinery, 1urniture and 1i.tures. 4$ Int ngib!e fixed ssets3 8efers to those fi.ed assets which cannot be seen and touched. 1or e.g. 7oodwill, ,atent, Trademar , "opyright. "oodwi!! Accounting view 7oodwill is an intangible asset which tells the present position of the organization in the mar et. It is mainly ta en into consideration at the time of admission, retirement, or death of any partner or at the time of sales of business. It is the reputation of the business in the mar et which can be cashed at any time. # n ge$i ! view 7oodwill helps the manager to calculate the accurate assets and liabilities of the company at the time of admission, retirement or death of any partner or sales of the business. It also tells the mar et position of the company to manager to ta e certain step for betterment of the organization. %x &p!e: 2r. B purchases business of 2r. C for 8s.4D la h. It includes 7oodwill & la h, fi.ed assets &9 la h, and "urrent assets : la h. Int ngib!e Assets ;nterprises frequently e.pend resources, or incur liabilities, on the acquisition, development, maintenance or enhancement of intangible resources such as scientific or technical nowledge, design and implementation of new processes or systems, licences, intellectual property, mar et nowledge and trademar s #including brand names and publishing titles$. "ommon e.amples of items encompassed by these broad headings are computer software, patents, copyrights, motion picture films, customer lists, mortgage servicing rights, fishing licenses, import quotas, franchises, customer or supplier relationships, customer loyalty, mar et share and mar eting rights. 7oodwill is another e.ample of an item of intangible nature which either arises on acquisition or is internally generated. =ot all the items described above will meet the definition of an intangible asset, that is, identifiability, control over a resource and e.pect3 action of future economic benefits flowing to the enterprise. If an item covered by this Standard does not meet the definition

of an intangible asset, e.penditure to acquire it or generate it internally is recognized as an e.pense when it is incurred. <owever, if the item is acquired in an amalgamation in the nature of purchase, it forms part of the goodwill recognized at the date. Some intangible assets may be contained in or on a physical substance such as a compact dis #in the case of computer software$, legal documentation #in the case of a licence or patent$ or film #in the case of motion pictures$. The cost of the physical substance containing the intangible assets is usually not significant. Accordingly, the physical substance containing an intangible asset, though tangible in nature, is commonly treated as a part of the intangible asset contained in or on it. In some cases, an asset may incorporate both intangible and tangible elements that are, in practice, inseparable. In determining whether such an asset should be treated under AS &D, Accounting for 1i.ed Assets, or as an intangible asset under this Standard, /udgement is required to assess as to which element is predominant. 1or e.ample, computer software for a computer controlled machine tool that cannot operate without that specific software is an integral part of the related hardware and it is treated as a fi.ed asset. The same applies to the operating system of a computer. Ehere the software is not an integral part of the related hardware, computer software is treated as an intangible asset. Identifi bi!it': The definition of an intangible asset requires that an intangible asset be identifiable. To be identifiable, it is necessary that the intangible asset is clearly distinguished from goodwill. 7oodwill arising on an amalgamation in the nature of purchase represents a payment made by the acquirer in anticipation of future economic benefits. The future economic benefits may result from synergy between the identifiable assets acquired or from assets which, individually, do not qualify for recognition in the financial statements but for which the acquirer is prepared to ma e a payment in the amalgamation. An intangible asset can be clearly distinguished from goodwill if the asset is separable. An asset is separable if the enterprise could rent, sell, e.change or distribute the specific future economic benefits attributable to the asset without also disposing of future economic benefits that flow from other assets used in the same revenue earning activity. Separability is not a necessary condition for identifiability since an enterprise may be able to identify an asset in some other way. 1or e.ample, if an intangible asset is acquired with a group of assets, the transaction may involve the transfer of legal rights that enable an enterprise to identify the intangible asset. Similarly, if an internal pro/ect aims to create legal rights for the enterprise, the nature of these rights may assist the enterprise in

identifying an underlying internally generated intangible asset. Also, even if an asset generates future economic benefits only in combination with other assets, the asset is identifiable if the enterprise can identify the future economic benefits that will flow from the asset. Cont$o! An enterprise controls an asset if the enterprise has the power to obtain the future economic benefits flowing from the underlying resource and also can restrict the access of others to those benefits. The capacity of an enterprise to control the future economic benefits from an intangible asset would normally stem from legal rights that are enforceable in a court of law. In the absence of legal rights, it is more difficult to demonstrate control. <owever, legal enforceability of a right is not a necessary condition for control since an enterprise may be able to control the future economic benefits in some other way. 2ar et and technical nowledge may give rise to future economic benefits. An enterprise controls those benefits if, for e.ample, the nowledge is protected by legal rights such as copyrights, a restraint of trade agreement #where permitted$ or by a legal duty on employees to maintain confidentiality. An enterprise may have a team of s illed staff and may be able to identify incremental staff s ills leading to future economic benefits from training. The enterprise may also e.pect that the staff will continue to ma e their s ills available to the enterprise. <owever, usually an enterprise has insufficient control over the e.pected future economic benefits arising from a team of s illed staff and from training to consider that these items meet the definition of an intangible asset. 1or a similar reason, specific management or technical talent is unli ely to meet the definition of an intangible asset, unless it is protected by legal rights to use it and to obtain the future economic benefits e.pected from it, and it also meets the other parts of the definition. An enterprise may have a portfolio of customers or amar et share and e.pect that, due to its efforts in building customer relationships and loyalty, the customers will continue to trade with the enterprise. <owever, in the absence of legal rights to protect, or other ways to control, the relationships with customers or the loyalty of the customers to the enterprise, the enterprise usually has insufficient control over the economic benefits from customer relationships and loyalty to consider that such items #portfolio of customers, mar et shares, customer relationships, customer loyalty$ meet the definition of intangible assets.

Futu$e %cono&ic Benefits The future economic benefits flowing from an intangible asset may include revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the enterprise. 1or e.ample, the use of intellectual property in a production process may reduce future production costs rather than increase future revenues.

Invest&ent in Int ngib!e Assets Ehen a company invests in material assets li e machines, or computers, the money is paid out of liquid funds, and a corresponding amount is boo ed as an asset on the balance sheet under a heading li e FmachineryF. In accounting terms, there has been a negative cash flow, but no e.penditure. The cost is incurred gradually, as the asset is depreciated. Ehen a company invests in an intangible asset li e a research program or an entrance to a new customer segment, it is not generally permitted to record the value of the research as an asset on the balance sheet. The investment thus appears both as a negative cash flow and as a cost item. Aoth types of investment are inspired by the same motive6 to achieve higher profitability in the long term, by sacrificing cash flow in the short term. The difference in accounting treatment, however, is very confusing and is made more so by the fact that the FcostF of intangible investments can ta e forms other than direct payments from cash reserves. It may ta e the form, for e.ample, of accepting an assignment that yields little cash revenue but has great publicity value, or seems li ely to enhance competence. <ere again the intangible asset is FfinancedF by FinvisibleF equity. ;.penditure on 8&5 generates value, which is clearly owned by the company, so it is reasonable to regard such e.penditure as investment. True, the economic value is uncertain, but the same can be said of any investment, including the value of city centre office buildings, as many investors have learned the hard way in recent years. <owever, cash outlays for nowledge acquisition are not always an intangible FassetF. 2any commentators insist training and education costs should be viewed as investments, but to whom or what does the value created by such investment adhereG Ehen individuals pay for their own education, they are investing in their own personal capital, but when such education is paid for by the company, the lin between payer and asset is bro en. The company is paying for an asset it will not own. Individual competence is FownedF by individuals, not companies so, from the companyHs point of view, money spent on educating employees should be treated as a cost, not an investment. Recognition nd Initi ! #e su$e&ent of n Int ngib!e Asset

The recognition of an item as an intangible asset requires an enterprise to demonstrate that the item meets the0 #a$ definition of an intangible asset and #b$ 8ecognition criteria set out in this Standard. An intangible asset should be recognized if, and only if0 #a$ it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise6 and #b$ The cost of the asset can be measured reliably. An enterprise should assess the probability of future economic benefits using reasonable and supportable assumptions that represent best estimate of the set of economic conditions that will e.ist over the useful life of the asset. An enterprise uses /udgement to assess the degree of certainty attached to the flow of future economic benefits that are attributable to the use of the asset on the basis of the evidence available at the time of initial recognition, giving greater weight to e.ternal evidence. An intangible asset should be measured initially at cost. Sep $ te Ac(uisition If an intangible asset is acquired separately, the cost of the intangible asset can usually be measured reliably. This is particularly so when the purchase consideration is in the form of cash or other monetary assets. The cost of an intangible asset comprises its purchase price, including any import duties and other ta.es #other than those subsequently recoverable by the enterprise from the ta.ing authorities$, and any directly attributable e.penditure on ma ing the asset ready for its intended use. 5irectly attributable e.penditure which includes, professional fees for legal services. Any trade discounts and rebates are deducted in arriving at the cost. If an intangible asset is acquired in e.change for shares or other securities of the reporting enterprise, the asset is recorded at its fair value, or the fair value of the securities issued, whichever is more clearly evident.

Ac(uisition s ) $t of n A& !g & tion

An intangible asset acquired in an amalgamation in the nature of purchase is accounted for in accordance with Accounting Standard #AS$ &9, Accounting for Amalgamations. Ehere in preparing the financial statements of the transferee company, the consideration is allocated to individual identifiable assets and liabilities on the basis of their fair values at the date of amalgamation, paragraphs 4I to )4 of this Standard need to be considered. Judgement is required to determine whether the cost #i.e. fair value$ of an intangible asset acquired in an amalgamation can be measured with sufficient reliability for the purpose of separate recognition. Kuoted mar et prices in an active mar et provide the most reliable measurement of fair value. The appropriate mar et price is usually the current bid price. If current bid prices are unavailable, the price of the most recent similar transaction may provide a basis from which to estimate fair value, provided that there has not been a significant change in economic circumstances between the transaction date and the date at which the asset?s fair value is estimated. If no active mar et e.ists for an asset, its cost reflects the amount that the enterprise would have paid, at the date of the acquisition, for the asset in an arm?s length transaction between nowledgeable and willing parties, based on the best information available. In determining this amount, an enterprise considers the outcome of recent transactions for similar assets. "ertain enterprises that are regularly involved in the purchase and sale of unique intangible assets have developed techniques for estimating their fair values indirectly. These techniques may be used for initial measurement of an intangible asset acquired in an amalgamation in the nature of purchase if their ob/ective is to estimate fair value as defined in this Standard and if they reflect current transactions and practices in the industry to which the asset belongs. These techniques include, where appropriate, applying multiples reflecting current mar et transactions to certain indicators driving the profitability of the asset #such as revenue, mar et shares, operating profit, etc.$ or discounting estimated future net cash flows from the asset.

In accordance with this Standard0

#a$ a transferee recognizes an intangible asset that meets the recognition criteria in paragraphs 4D and 4&, even if that intangible asset had not been recognized in the financial statements of the transferor6 and #b$ if the cost #i.e. fair value$ of an intangible asset acquired as part of an amalgamation in

the nature of purchase cannot be measured reliably, that asset is not recognized as a separate intangible asset but is included in goodwill. >nless there is an active mar et for an intangible asset acquired in an amalgamation in the nature of purchase, the cost initially recognized for the intangible asset is restricted to an amount that does not create or increase any capital reserve arising at the date of the amalgamation. "ove$n&ent "$ nt:

Ac(uisition b' w ' of

In some cases, an intangible asset may be acquired free of charge, or for nominal consideration, by way of a government grant. This may occur when a government transfers or allocates to an enterprise intangible assets such as airport landing rights, licenses to operate radio or television stations, import licenses or quotas or rights to access other restricted resources. AS &4, Accounting for 7overnment 7rants, requires that government grants in the form of non3 monetary assets, given at a concessional rate should be accounted for on the basis of their acquisition cost. AS &4 also require that in case a non3monetary asset is given free of cost, it should be recorded at a nominal value. Accordingly, intangible asset acquired free of charge, or for nominal consideration, by way of government grant is recognized at a nominal value or at the acquisition cost, as appropriate6 any e.penditure that is directly attributable to ma ing the asset ready for its intended use is also included in the cost of the asset. +perational efficiency @ the efficiency of the Internal Structure as I call it @ has been measured at least since the birth of the industrial organisation. The other two intangible areas6 ;.ternal Structure and Internal Structure are still not monitored on a regular basis by most companies. The problem is not that Fintangible measuresF are difficult to design. The problem is more what to measure and that the outcomes seem difficult to interpret. "ustomer surveys @ when used systematically @ yield an abundance of data which managers find difficult to correlate with changes in business performance. Loda for instance, does a monthly survey of some )DD customers in each area of the business, as ing specific and open3ended questions. T*e Int ngib!e Assets #onito$ F$ &ewo$+ The FinvisibleF intangible part of the balance sheet can be classified as a family of three0

Individu ! co&petence is peopleHs capacity to act in various situations. It includes s ill, education, e.perience, values and social s ills. ,eople are the only true agents in business6 all assets and structures, whether tangible physical products or intangible relations, are the result of human action and depend ultimately on people for their continued e.istence. "ompetence cannot be owned by anyone or anything but the person who possesses them, because when all is said and done employees are voluntary members of the organisation. A case can, however, be made for including competence in the balance sheet, because it is impossible to conceive of an organisation without people. ,eople tend to be loyal, if they are treated fairly and feel a sense of shared responsibility. That is why companies are generally willing to pay some ind of compensation to those who retire, or have to be laid off. This ind of compensation varies from country to country, but often ta es the form of redundancy pay, umbrella agreements #Fgolden parachutesF$ and pensions. Although such commitments are not recorded as liabilities in the balance sheet, they can be seen as pledges or commitments, li e leasing or rental contracts, and thus a form of invisible financing of employee competence. Inte$n ! st$uctu$e consists of a wide range of patents, concepts, models, and computer and administrative systems. These are created by the employees and are thus generally FownedF by the organisation, and adhere to it. Sometimes they can be acquired from elsewhere. 5ecisions to develop or invest in such assets can be made with some degree of confidence, because the wor is done in3house, or bought from outside. Also the informal organisation, the internal networ s, the FcultureF or the FspiritF belongs to the internal structure. The internal structure and the people together constitute what we generally call the ForganisationF. %xte$n ! st$uctu$e consists of relationships with customers and suppliers, brand names, trademar s and reputation, or FimageF. Some of these can be considered legal property, but the bond is not as strong as in the case of internal assets because investments in them cannot be

made with the same degree of confidence. The value of such assets is primarily influenced by how well the company solves its customersH problems, and there is always an element of uncertainty here. 8eputations and relationships can be good or bad, and can change over time. The e.ternal structure is not particularly liquid, and unli e the material assets, they may or may not be legally owned by the company. The economic value of a customer relation is no more FinvisibleF than the mar et value of a house. The reasons why the value of a relation seems invisible today is because it does not have a generally accepted definition and that it is not measured according to a standard. Aut these drawbac s do not mean that it is impossible or unnecessary to measure it, only that comparison between companies and over time are difficult to ma e. Aecause of the reluctance of ban s to lend for investment in intangible assets, the development of intangible assets is mostly self3financed. In other words, the invisible assets are matched, on the financing side of the balance sheet, by equally invisible finance, most of which in the form of invisib!e e(uit'. Lnowledge organisations li e 2organ & Aan s or E23data have little machinery, other than their employees and because only people can act, they are both the minders of the machines and the FmachinesF, the revenue creators, themselves. 1or the most part, their competence is directed outwards, to the tas of generating revenue, by solving customersH problems. It is this outward3directed energy that creates the relationships, networ s, and image that comprise the organisationHs e.ternal structure. Similarly, it is the smaller amount of human competence that is directed inwards that creates, maintains, develops or erodes the organisationHs internal structure. %xc* nges of Assets An intangible asset may be acquired in e.change or part e.change for another asset. In such a case, the cost of the asset acquired is determined in accordance with the principles laid down in this regard in AS &D, Accounting for 1i.ed Assets. Inte$n !!' "ene$ ted "oodwi!! Internally generated goodwill should not be recognized as an asset. In some cases, e.penditure is incurred to generate future economic benefits, but it does not result in the creation of an intangible asset that meets the recognition criteria in this Standard. Such e.penditure is often described as contributing to internally generated goodwill. Internally generated goodwill is not recognized as an asset because it is not an identifiable resource controlled by the enterprise that can be measured reliably at cost.

5ifferences between the mar et value of an enterprise and the carrying amount of its identifiable net assets at any point in time may be due to a range of factors that affect the value of the enterprise. <owever, such differences cannot be considered to represent the cost of intangible assets controlled by the enterprise.

Inte$n !!' "ene$ ted Int ngib!e Assets It is sometimes difficult to assess whether an internally generated intangible asset qualifies for recognition. It is often difficult to0

#a$ identify whether, and the point of time when, there is an identifiable asset that will generate probable future economic benefits6 and #b$ determine the cost of the asset reliably. In some cases, the cost of generating an intangible asset internally cannot be distinguished from the cost of maintaining or enhancing the enterprise?s internally generated goodwill or of running day3to3day operations. Therefore, in addition to complying with the general requirements for the recognition and initial measurement of an intangible asset, an enterprise applies the requirements and guidance in paragraphs )'3:9 below to all internally generated intangible assets. To assess whether an internally generated intangible asset meets the criteria for recognition, an enterprise classifies the generation of the asset into0

#a$ a research phase6 and #b$ A development phase. Although the terms ?research? and ?development? are defined, the terms ?research phase? and ?development phase? have a broader meaning for the purpose of this Standard. If an enterprise cannot distinguish the research phase from the development phase of an internal pro/ect to create an intangible asset, the enterprise treats the e.penditure on that pro/ect as if it were incurred in the research phase only.

Rese $c* )* se =o intangible asset arising from research #or from the research phase of an internal pro/ect$ should be recognized ;.penditure on research #or on the research phase of an internal pro/ect$ should be recognized as an e.pense when it is incurred.

This Standard ta es the view that, in the research phase of a pro/ect, an enterprise cannot demonstrate that an intangible asset e.ists from which future economic benefits are probable. Therefore, this e.penditure is recognized as an e.pense when it is incurred.

;.amples of research activities are0 #a$ activities aimed at obtaining new nowledge6 #b$ the search for, evaluation and final selection of, applications of research findings or other Lnowledge6 #c$ the search for alternatives for materials, devices, products, processes, systems or services6 #d$ the formulation, design, evaluation and final selection of possible alternatives for new or improved materials, devices, products, processes, systems or services. Deve!op&ent )* se: An intangible asset arising from development #or from the development phase of an internal pro/ect$ should be recognized if, and only if, an enterprise can demonstrate all of the following0

#a$ the technical feasibility of completing the intangible asset so that it will be available for use or sale6 #b$ its intention to complete the intangible asset and use or sell it6 #c$ its ability to use or sell the intangible asset6 #d$ <ow the intangible asset will generate probable future economic benefits. Among other things, the enterprise should demonstrate the e.istence of a mar et for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset6 #e$ the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset6 and #f$ its ability to measure the e.penditure attributable to the intangible asset during its development reliably. In the development phase of a pro/ect, an enterprise can, in some instances, identify an intangible asset and demonstrate that future economic benefits from the asset are probable. This is because the development phase of a pro/ect is further advanced than the research phase.

%x &p!es of deve!op&ent ctivities $e:

#a$ the design, construction and testing of pre3production or pre3use prototypes and models6 #b$ the design of tools, /igs, moulds and dies involving new technology6 #c$ the design, construction and operation of a pilot plant that is not of a scale economically feasible for commercial production6 and #d$ the design, construction and testing of a chosen alternative for new or improved materials, devices, products, processes, systems or services. To demonstrate how an intangible asset will generate probable future economic benefits, an enterprise assesses the future economic benefits to be received from the asset using the principles in Accounting Standard on Impairment of Assets9. If the asset will generate economic benefits only in combination with other assets, the enterprise applies the concept of cash generating units as set out in Accounting Standard on Impairment of Assets. Availability of resources to complete, use and obtain the benefits from an intangible asset can be demonstrated by, for e.ample, a business plan showing the technical, financial and other resources needed and the enterprise?s ability to secure those resources. In certain cases, an enterprise demonstrates the availability of e.ternal finance by obtaining a lender?s indication of its willingness to fund the plan. An enterprise?s costing systems can often measure reliably the cost of generating an intangible asset internally, such as salary and other e.penditure incurred in securing copyrights or licences or developing computer software. Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance should not be recognised as intangible assets. This Standard ta es the view that e.penditure on internally generatedbrands, mastheads, publishing titles, customer lists and items similar in substance cannot be distinguished from the cost of developing the business as a whole. Therefore, such items are not recognised as intangible assets.

Cost of n Inte$n !!' "ene$ ted Int ngib!e Asset The cost of an internally generated intangible asset comprises all e.penditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating, producing and ma ing the asset ready for its intended use. The cost includes, if applicable0

#a$ e.penditure on materials and services used or consumed in generating the intangible asset6 #b$ the salaries, wages and other employment related costs of personnel directly engaged in generating the asset6 #c$ any e.penditure that is directly attributable to generating the asset, such as fees to register a legal right and the amortisation of patents and licences that are used to generate the asset6 and #d$ overheads that are necessary to generate the asset and that can be allocated on a reasonable and consistent basis to the asset #for e.ample, an allocation of the depreciation of fi.ed assets, insurance premium and rent$. Allocations of overheads are made on bases similar to those used in allocating overheads to inventories Aorrowing "osts, establishes criteria for the recognition of interest as a component of the cost of a qualifying asset. These criteria are also applied for the recognition of interest as a component of the cost of an internally generated intangible asset. The following are not components of the cost of an internally generated intangible asset0 #a$ selling, administrative and other general overhead e.penditure unless this e.penditure can be directly attributed to ma ing the asset ready for use. #b$ clearly identified inefficiencies and initial operating losses incurred before an asset achieves planned performance6 and #c$ e.penditure on training the staff to operate the asset. %x &p!e: An ente$p$ise is deve!oping new p$oduction p$ocess, Du$ing t*e 'e $ -../0 expenditu$e incu$$ed w s Rs, /. ! +*s0 of w*ic* Rs, 1 ! +*s w s incu$$ed befo$e / Dece&be$ -../ nd / ! +* w s incu$$ed between /st Dece&be$ -../ nd 2/st Dece&be$ -../, T*e ente$p$ise is b!e to de&onst$ te t* t0 t /st Dece&be$ -../0 t*e p$oduction p$ocess &et t*e c$ite$i fo$ $ecognition s n int ngib!e sset, T*e $ecove$ b!e &ount of t*e +now3*ow e&bodied in t*e p$ocess 4inc!uding futu$e c s* outf!ows to co&p!ete t*e p$ocess befo$e it is v i! b!e fo$ use5 is esti& ted to be Rs, 6 ! +*s, At t*e end of -../0 t*e p$oduction p$ocess is $ecognised s n int ngib!e sset t cost of Rs, / ! +* 4expenditu$e incu$$ed since t*e d te w*en t*e $ecognition c$ite$i we$e &et0 t* t is0 / Dece&be$ -../5, T*e Rs, 1 ! +*s expenditu$e incu$$ed befo$e / Dece&be$ -../ is $ecognised s n expense bec use t*e $ecognition c$ite$i we$e not &et unti! / Dece&be$ -../, T*is expenditu$e wi!! neve$ fo$& p $t of t*e cost of t*e p$oduction p$ocess $ecognised in t*e b ! nce s*eet. Du$ing t*e 'e $ -..-0 expenditu$e incu$$ed is Rs, -. ! +*s, At t*e end of -..-0 t*e $ecove$ b!e &ount of t*e +now3*ow e&bodied in t*e p$ocess 4inc!uding futu$e c s* outf!ows to co&p!ete t*e p$ocess befo$e it is v i! b!e fo$ use5 is esti& ted to be Rs, /1 ! +*s, At t*e end of t*e 'e $ -..-0 t*e cost of t*e p$oduction p$ocess is Rs, -/ ! +*s 4Rs, / ! +* expenditu$e $ecognised t t*e end of -../ p!us Rs, -. ! +*s expenditu$e $ecognised in -..-5, T*e ente$p$ise $ecognises n

i&p i$&ent !oss of Rs, - ! +*s to djust t*e c $$'ing &ount of t*e p$ocess befo$e i&p i$&ent !oss 4Rs, -/ ! +*s5 to its $ecove$ b!e &ount 4Rs, /1! +*s5, T*is i&p i$&ent !oss wi!! be $eve$sed in subse(uent pe$iod if t*e $e(ui$e&ents fo$ t*e $eve$s ! of n i&p i$&ent !oss in Accounting St nd $d on I&p i$&ent of Assets60 $e &et,

Recognition of n %xpense: ;.penditure on an intangible item should be recognised as an e.pense when it is incurred unless0 #a$ it forms part of the cost of an intangible asset that meets the recognition criteria. +r #b$ the item is acquired in an amalgamation in the nature of purchase and cannot be #c$ recognised as an intangible asset. If this is the case, this e.penditure #included in the cost of acquisition$ should form part of the amount attributed to goodwill #capital reserve$ at the date of acquisition. In some cases, e.penditure is incurred to provide future economic benefits to an enterprise, but no intangible asset or other asset is acquired or created that can be recognized In these cases, the e.penditure is recognized as an e.pense when it is incurred. 1or e.ample, e.penditure on research is always recognised as an e.pense when it is incurred. ;.amples of other e.penditure that is recognised as an e.pense when it is incurred include0 #a$ e.penditure on start3up activities #start3up costs$, unless this e.penditure is included in the cost of an item of fi.ed asset. Start3up costs may consist of preliminary e.penses incurred in establishing a legal entity such as legal and secretarial costs, e.penditure to open a new facility or business #pre3opening costs$ or e.penditures for commencing new operations or launching new products or processes #pre3operating costs$. #b$ e.penditure on training activities6 #c$ e.penditure on advertising and promotional activities6 and #d$ e.penditure on relocating or re3organising part or all of an enterprise.

) st %xpenses not to be Recognised s n Asset

;.penditure on an intangible item that was initially recognised as an e.pense by a reporting enterprise in previous annual financial statements or interim financial reports should not be recognised as part of the cost of an intangible asset at a later date. Subse(uent %xpenditu$e Subsequent e.penditure on an intangible asset after its purchase or its completion should be recognised as an e.pense when it is incurred unless0 #a$ it is probable that the e.penditure will enable the asset to generate future economic benefits in e.cess of its originally assessed standard of performance6 and #b$ the e.penditure can be measured and attributed to the asset reliably. If these conditions are met, the subsequent e.penditure should be added to the cost of the intangible asset. Subsequent e.penditure on a recognised intangible asset is recognized as an e.pense if this e.penditure is required to maintain the asset at its originally assessed standard of performance. The nature of intangible assets is such that, in many cases, it is not possible to determine whether subsequent e.penditure is li ely to enhance or maintain the economic benefits that will flow to the enterprise from those assets. In addition, it is often difficult to attribute such e.penditure directly to a particular intangible asset rather than the business as a whole. Therefore, only rarely will e.penditure incurred after the initial recognition of a purchased intangible asset or after completion of an internally generated intangible asset result in additions to the cost of the intangible.

#e su$e&ent Subse(uent to Initi ! Recognition After initial recognition, an intangible asset should be carried at its cost less any accumulated amortization and any accumulated impairment losses.

A&o$ti7 tion A&o$ti7 tion )e$iod: The depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not e.ceed ten years from the date when the asset is available for use. Amortization should commence when the asset is available for use.

As the future economic benefits embodied in an intangible asset are consumed over time, the carrying amount of the asset is reduced to reflect that consumption. This is achieved by systematic allocation of the cost of the asset, less any residual value, as an e.pense over the asset?s useful life. Amortisation is recognised whether or not there has been an increase in, for e.ample, the asset?s fair value or recoverable amount. 2any factors need to be considered in determining the useful life of an intangible asset including0 The e.pected usage of the asset by the enterprise and whether the asset could be efficiently managed by another management team. Typical product life cycles for the asset and public information on estimates of useful lives of similar types of assets that are used in a similar way. Technical, technological or other types of obsolescence. The stability of the industry in which the asset operates and changes in the mar et demand for the products or services output from the asset. ;.pected actions by competitors or potential competitors. The level of maintenance e.penditure required to obtain the e.pected future economic benefits from the asset and the company?s ability and intent to reach such a level. the period of control over the asset and legal or similar limits on the use of the asset, such as the e.piry dates of related leases. Ehether the useful life of the asset is dependent on the useful life of other assets of the enterprise.

7iven the history of rapid changes in technology, computer software and many other intangible assets are susceptible to technological obsolescence. Therefore, it is li ely that their useful life will be short. ;stimates of the useful life of an intangible asset generally become less reliable as the length of the useful life increases. This Standard adopts a presumption that the useful life of intangible assets is unli ely to e.ceed ten years. In some cases, there may be persuasive evidence that the useful life of an intangible asset will be a specific period longer than ten years. In these cases, the presumption that the useful life generally does not e.ceed ten years is rebutted and the enterprise0 amortizes the intangible asset over the best estimate of its useful life6 ;stimates the recoverable amount of the intangible asset at least annually in order to identify any impairment loss. and 5iscloses the reasons why the presumption is rebutted and the factor#s$ that played a significant role in determining the useful life of the asset.

%x &p!es A. An enterprise has purchased an e.clusive right to generate hydroelectric power for si.ty years. The costs of generating hydro3electric power are much lower than the costs of obtaining power from alternative sources. It is e.pected that the geographical area surrounding the power station will demand a significant amount of power from the power station for at least si.ty years. The enterprise amortises the right to generate power over si.ty years, unless there is evidence that its useful life is shorter. A. An enterprise has purchased an e.clusive right to operate a toll motorway for thirty years. There is no plan to construct alternative routes in the area served by the motorway. It is e.pected that this motorway will be in use for at least thirty years. The enterprise amortises the right to operate the motorway over thirty years, unless there is evidence that its useful life is shorter. The useful life of an intangible asset may be very long but it is always finite. >ncertainty /ustifies estimating the useful life of an intangible asset on a prudent basis, but it does not /ustify choosing a life that is unrealistically short. If control over the future economic benefits from an intangible asset is achieved through legal rights that have been granted for a finite period, the useful life of the intangible asset should not e.ceed the period of the legal rights unless0

#a$ the legal rights are renewable6 and #b$ renewal is virtually certain. There may be both economic and legal factors influencing the useful life of intangible asset economic factors determine the period over which future economic benefits will be generated legal factors may restrict the period over which the enterprise controls access to these benefits. The useful life is the shorter of the periods determined by these factors. The following factors, among others, indicate that renewal of a legal right is virtually certain0 #a$ the fair value of the intangible asset is not e.pected to reduce as the initial e.piry date

approaches, or is not e.pected to reduce by more than the cost of renewing the underlying right6 #b$ There is evidence #possibly based on past e.perience$ that the legal rights will be renewed6 #c$ There is evidence that the conditions necessary to obtain the renewal of the legal right #if any$ will be satisfied. A&o$tis tion #et*od The amortisation method used should reflect the pattern in which the asset?s economic benefits are consumed by the enterprise. If that pattern cannot be determined reliably, the straight3line method should be used. The amortisation charge for each period should be recognised as an e.pense unless another Accounting Standard permits or requires it to be included in the carrying amount of another asset. A variety of amortisation methods can be used to allocate the depreciable amount of an asset on a systematic basis over its useful life. These methods include the straight3line method, the diminishing balance method and the unit of production method. The method used for an asset is selected based on the e.pected pattern of consumption of economic benefits and is consistently applied from period to period, unless there is a change in the e.pected pattern of consumption of economic benefits to be derived from that asset. There will rarely, if ever, be persuasive evidence to support an amortisation method for intangible assets that results in a lower amount of accumulated amortisation than under the straight3line method. Amortisation is usually recognised as an e.pense. <owever, sometimes, the economic benefits embodied in an asset are absorbed by the enterprise in producing other assets rather than giving rise to an e.pense. In these cases, the amortisation charge forms part of the cost of the other asset and is included in its carrying amount. 1or e.ample, the amortisation of intangible assets used in a production process is included in the carrying amount of inventories. Residu ! 8 !ue The residual value of an intangible asset should be assumed to be zero unless0 #a$ there is a commitment by a third party to purchase the asset at the end of its useful life6 or #b$ there is an active mar et for the asset #i$ residual value can be determined by reference to that mar et6 #ii$ it is probable that such a mar et will e.ist at the end of the asset?s useful life.

A residual value other than zero implies that an enterprise e.pects to dispose of the intangible asset before the end of its economic life. The residual value is estimated using prices prevailing at the date of acquisition of the asset, for the sale of a similar asset that has reached the end of its estimated useful life and that has operated under conditions similar to those in which the asset will be used. The residual value is not subsequently increased for changes in prices or value. Review of A&o$tis tion )e$iod nd A&o$tis tion #et*od: The amortisation period and the amortisation method should be reviewed at least at each financial year end. If the e.pected useful life of the asset is significantly different from previous estimates, the amortisation period should be changed accordingly. If there has been a significant change in the e.pected pattern of economic benefits from the asset, the amortisation method should be changed to reflect the changed pattern. Such changes should be accounted for in accordance with AS :, =et ,rofit or -oss for the ,eriod, ,rior ,eriod Items and "hanges in Accounting ,olicies. 5uring the life of an intangible asset, it may become apparent that the estimate of its useful life is inappropriate. 1or e.ample, the useful life may be e.tended by subsequent e.penditure that improves the condition of the asset beyond its originally assessed standard of performance. Also, the recognition of an impairment loss may indicate that the amortisation period needs to be changed. +ver time, the pattern of future economic benefits e.pected to flow to an enterprise from an intangible asset may change. 1or e.ample, it may become apparent that a diminishing balance method of amortization is appropriate rather than a straight3line method. Another e.ample is if use of the rights represented by a licence is deferred pending action on other components of the business plan. In this case, economic benefits that flow from the asset may not be received until later periods.

Recove$ bi!it' of t*e C $$'ing A&ount 9 I&p i$&ent :osses To determine whether an intangible asset is impaired, an enterprise applies Accounting Standard on Impairment of Assets. That Standard e.plains how an enterprise reviews the carrying amount of its assets, how it determines the recoverable amount of an asset and when it recognises or reverses an impairment loss.

If an impairment loss occurs before the end of the first annual accounting period commencing after acquisition for an intangible asset acquired in an amalgamation in the nature of purchase, the impairment loss is recognised as an ad/ustment to both the amount assigned to the intangible asset and the goodwill #capital reserve$ recognised at the date of the amalgamation. <owever, if the impairment loss relates to specific events or changes in circumstances occurring after the date of acquisition, the impairment loss is recognised under Accounting Standard on Impairment of Assets and not as an ad/ustment to the amount assigned to the goodwill #capital reserve$ recognised at the date of acquisition. In addition to the requirements of Accounting Standard on Impairment of Assets, an enterprise should estimate the recoverable amount of the following intangible assets at least at each financial year end even if there is no indication that the asset is

#a$ an intangible asset that is not yet available for use6 and #b$ an intangible asset that is amortised over a period e.ceeding ten years from the date when the asset is available for use. The recoverable amount should be determined under Accounting Standard on Impairment of Assets and impairment losses recognized accordingly. The ability of an intangible asset to generate sufficient future economic benefits to recover its cost is usually sub/ect to great uncertainty until the asset is available for use. Therefore, this Standard requires an enterprise to test for impairment, at least annually, the carrying amount of an intangible asset that is not yet available for use. It is sometimes difficult to identify whether an intangible asset may be impaired because, among other things, there is not necessarily any obvious evidence of obsolescence. This difficulty arises particularly if the asset has a long useful life. As a consequence, this Standard requires, as a minimum, an annual calculation of the recoverable amount of an intangible asset if its useful life e.ceeds ten years from the date when it becomes available for use. The requirement for an annual impairment test of an intangible asset applies whenever the current total estimated useful life of the asset e.ceeds ten years from when it became available for use. Therefore, if the useful life of an intangible asset was estimated to be less than ten years at initial recognition, but the useful life is e.tended by subsequent

e.penditure to e.ceed ten years from when the asset became available for use, an enterprise performs the impairment test and also ma es the disclosure. Reti$e&ents nd Dispos !s An intangible asset should be derecognised #eliminated from the balance sheet$ on disposal or when no future economic benefits are e.pected from its use and subsequent disposal. 7ains or losses arising from the retirement or disposal of an intangible asset should be determined as the difference between the net disposal proceeds and the carrying amount of the asset and should be recognised as income or e.pense in the statement of profit and loss. An intangible asset that is retired fromactive use and held for disposal is carried at its carrying amount at the date when the asset is retired from active use. At least at each financial year end, an enterprise tests the asset for impairment under Accounting Standard on Impairment of Assets, and recognises any impairment loss accordingly.

Rese $c* nd Deve!op&ent %xpenditu$e The financial statements should disclose the aggregate amount of research and development e.penditure recognised as an e.pense during the period. 8esearch and development e.penditure comprises all e.penditure that is directly attributable to research or development activities or that can be allocated on a reasonable and consistent basis to such activities for guidance on the type of e.penditure to be included for the purpose of the disclosure.

Ot*e$ Info$& tion An enterprise is encouraged, but not required, to give a description of any fully amortised intangible asset that is still in use. I!!ust$ tion A I, I!!ust$ tive App!ic tion of t*e Accounting St nd $d to Inte$n ! Use Co&pute$ Softw $e "omputer software for internal use can be internally generated or acquired.

Inte$n !!' "ene$ ted Co&pute$ Softw $e &. Internally generated computer software for internal use is developed or modified internally by the enterprise solely to meet the needs of the enterprise and at no stage it is planned to sell it. 4. The stages of development of internally generated software may be categorised into the following two phases0 M ,reliminary pro/ect stage, i.e., the research phase M 5evelopment stage )$e!i&in $' p$oject st ge At the preliminary pro/ect stage the internally generated software should not be recognised as an asset. ;.penditure incurred in the preliminary pro/ect stage should be recognised as an e.pense when it is incurred. The reason for such a treatment is that at this stage of the software pro/ect an enterprise can not demonstrate that an asset e.ists from which future economic benefits are probable. Ehen a computer software pro/ect is in the preliminary pro/ect stage, enterprises are li ely to0 o 2a e strategic decisions to allocate resources between alternative pro/ects at a given point in time. 1or e.ample, should programmers develop a new payroll system or direct their efforts toward correcting e.isting problems in an operating payroll system. o 5etermine the performance requirements #that is, what it is that they need the software to do$ and systems requirements for the computer software pro/ect it has proposed to underta e. o ;.plore alternative means of achieving specified performance requirements. 1or e.ample, should an entity ma e or buy the software. Should the software run on a mainframe or a client server system. o 5etermine that the technology needed to achieve performance requirements e.ists. o Select a consultant to assist in the development andNor installation of the software. Deve!op&ent St ge Internally generated software arising at the development stage should be recognised as an asset if, and only if, an enterprise can demonstrate all of the following0

#a$ The technical feasibility of completing the internally generated software so that it will be available for internal use. #b$ the intention of the enterprise to complete the internally generated software and use it to perform the functions intended. 1or e.ample, the intention to complete the internally generated software can be demonstrated if the enterprise commits to the funding of the software pro/ect. #c$ The ability of the enterprise to use the software. #d$ <ow the software will generate probable future economic benefits. Among other things, the enterprise should demonstrate the usefulness of the software. #d$ the availability of adequate technical, financial and other resources to complete the development and to use the software6 and #e$ the ability of the enterprise to measure the e.penditure attributable to the software during its development reliably. ;.amples of development activities in respect of internally generated software include0 #a$ 5esign including detailed program design 3 which is the process of detail design of computer software that ta es product function, feature, and technical requirements to their most detailed, logical form and is ready for coding. #b$ "oding which includes generating detailed instructions in a computer language to carry out the requirements described in the detail program design. The coding of computer software may begin prior to, concurrent with, or subsequent to the completion of the detail program design. At the end of these stages of the development activity, the enterprise has a wor ing model, which is an operative version of the computer software capable of performing all the ma/or planned functions, and is ready for initial testing #FbetaF versions$. #c$ Testing which is the process of performing the steps necessary to determine whether the coded computer software product meets function, feature, and technical performance requirements set forth in the product design. At the end of the testing process, the enterprise has a master version of the internal use software, which is a completed version together with the related user documentation and the training materials. Cost of inte$n !!' gene$ ted softw $e The cost of internally generated software is the sum of the e.penditure incurred from the time when the software first met the recognition criteria for an intangible asset. An e.penditure which did not meet the recognition criteria as aforesaid and e.pensed in an

earlier financial statements should not be reinstated if the recognition criteria are met later. The cost of internally generated software comprises all e.penditure that can be directly attributed or allocated on a reasonable and consistent basis to create the software for its intended use. The cost include0 #a$ e.penditure on materials and services used or consumed in developing the software6 #b$ the salaries, wages and other employment related costs of personnel directly engaged in developing the software6 #c$ Any e.penditure that is directly attributable to generating software6 and #d$ +verheads that are necessary to generate the software and that can be allocated on a reasonable and consistent basis to the software #1or e.ample, an allocation of the depreciation of fi.ed assets, insurance premium and rent$. Allocations of overheads are made on basis similar to those used in allocating the overhead to inventories. The following are not components of the cost of an internally generated software0 #a$ selling, administration and other general overhead e.penditure unless this e.penditure can be directly attributable to the development of the software6 #b$ clearly identified inefficiencies and initial operating losses incurred before software achieves the planned performance6 and #c$ e.penditure on training the staff to use the internally generated software. Softw $e Ac(ui$ed fo$ Inte$n ! Use The cost of software acquired for internal use should be recongised as an asset. The cost of software purchased for internal use comprises its purchase price, including any import duties and other ta.es #other than those subsequently recoverable by the enterprise from the ta.ing authorities$ and any directly attributable e.penditure on ma ing the software ready for its use. Any trade discounts and rebates are deducted in arriving at the cost.

Subse(uent expenditu$e ;nterprises may incur considerable cost in modifying e.isting software systems. Subsequent e.penditure on software after its purchase or its completion should be recognised as an e.pense when it is incurred unless0 #a$ it is probable that the e.penditure will enable the software to generate future economic

benefits in e.cess of its originally assessed standards of performance6 and #b$ the e.penditure can be measured and attributed to the software reliably. If these conditions are met, the subsequent e.penditure should be added to the carrying amount of the software. "osts incurred in order to restore or maintain the future economic benefits that an enterprise can e.pect from the originally assessed standard of performance of e.isting software systems is recognised as an e.pense when, and only when, the restoration or maintenance wor is carried out. A&o$tis tion pe$iod The depreciable amount of a software should be allocated on a systematic basis over the best estimate of its useful life. The amortisation should commence when the software is available for use. As per this Standard, there is a rebuttable presumption that the useful life of an intangible asset will not e.ceed ten years from the date when the asset is available for use. <owever, given the history of rapid changes in technology, computer software is susceptible to technological obsolescence. Therefore, it is li ely that useful life of the software will be much shorter, say ) to : years.

A&o$tis tion &et*od The amortisation method used should reflect the pattern in which the software?s economic benefits are consumed by the enterprise. If that pattern can not be determined reliably, the straight3line method should be used. The amortisation charge for each period should be recognised as an e.penditure unless another Accounting Standard permits or requires it to be included in the carrying amount of another asset. 1or e.ample, the amortisation of a software used in a production process is included in the carrying amount of inventories.

II, I!!ust$ tive App!ic tion of t*e Accounting St nd $d to ;eb3Site Costs &. An enterprise may incur internal e.penditures when developing, enhancing and maintaining its own web site. The web site may be used for various purposes such as promoting and advertising products and services, providing electronic services, and selling products and services. 4. The stages of a web site?s development can be described as follows0

#a$ ,lanning 3 includes underta ing feasibility studies, defining ob/ectives and specifications, evaluating alternatives and selecting preferences. #b$ Application and Infrastructure 5evelopment @ includes obtaining a domain name purchasing and developing hardware and operating software, installing developed applications and stress testing6 and #c$ 7raphical 5esign and "ontent 5evelopment 3 includes designing the appearance of web pages and creating, purchasing, preparing and uploading information, either te.tual or graphical in nature, on the web site prior to the web site becoming available for use. This information may either be stored in separate databases that are integrated into #or accessed from$ the web site or coded directly into the web pages. +nce development of a web site has been completed and the web site is available for use, the web site commences an operating stage. 5uring this stage, an enterprise maintains and enhances the applications, infrastructure, graphical design and content of the web site. ). The e.penditures for purchasing, developing, maintaining and enhancing hardware #e.g., web servers, staging servers, production servers and Internet connections$ related to a web site are not accounted. Accounting for 1i.ed Assets. Additionally, when an enterprise incurs an e.penditure for having an Internet service provider host the enterprise?s web site on it?s own servers connected to the Internet.

9. An intangible asset is defined in paragraph O of this Standard as an identifiable non3monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. Ay analogy, a web site is another e.ample of an intangible asset. Accordingly, a web site developed by an enterprise for its own use is an internally generated intangible asset that is sub/ect to the requirements of this Standard. :. An enterprise should apply the requirements of this Standard to an internal e.penditure for developing, enhancing and maintaining its own web site. The Standard requires e.penditure on start3up activities to be recognized as an e.pense when incurred. 5eveloping a web site by an enterprise for its own use is not a start3up activity to the e.tent that an internally generated intangible asset is created. The enterprise should evaluate the nature of each activity for which an e.penditure is incurred #e.g., training employees and maintaining the web site$ and the web site?s stage of development or post3development. An enterprise may incur an e.penditure to enable use of content, which had been purchased or created for another purpose, on its web site #e.g.,

acquiring a license to reproduce information$ or may purchase or create content specifically for use on its web site prior to the web site becoming available for use. In such circumstances, an enterprise should determine whether a separate asset, is identifiable with respect to such content #e.g., copyrights and licenses$, and if a separate asset is not identifiable, then the e.penditure should be included in the cost of developing the web site. Ehen an enterprise acquires or creates content, it may be possible to identify an intangible asset #e.g., a license or a copyright$ separate from a web site. "onsequently, an enterprise determines whether an e.penditure to enable use of content, which had been created for another purpose, on its web site becoming available for use results in a separate identifiable asset or the e.penditure is included in the cost of developing the web #c$ the operating stage commences once the web site is available for use, and therefore an e.penditure to maintain or enhance the web site after development has been completed. O. An intangible asset is measured subsequent to initial recognition by applying the requirements an intangible asset always has a finite useful life, a web site that is recognised as an asset is amortised over the best estimate of its useful life. (. The following table illustrates e.amples of e.penditures that occur within each of the stages It is not intended to be a comprehensive chec list of e.penditures that might be incurred.

N tu$e of %xpenditu$e )! nning M underta ing feasibility studies M defining hardware and software specifications M evaluating alternative products and suppliers M selecting preferences. App!ic tion nd Inf$ st$uctu$e Deve!op&ent M purchasing or developing hardware M obtaining a domain name M developing operating software #e.g., operating system and under paragraphs 4D and 99 server software$ M developing code for the application M installing developed applications on the web server M stress testing

Accounting t$e t&ent ;.pense when incurred

Apply the requirements of AS &D

;.pense when incurred, unless it meets the recognition criteria.

"$ p*ic ! Design nd Content Deve!op&ent M designing the appearance #e.g., layout and colour$ of web pages. M creating, purchasing, preparing #e.g., creating lin s and under identifying tags$, and uploading information, either te.tual or graphical in nature, on the web site prior to the web site becoming available for use. ;.amples of content include information about an enterprise, products or services offered for sale, and topics that subscribers access. Ope$ ting M updating graphics and revising content. M adding new functions, features M registering the web site with search engines M bac ing up data M reviewing security access M analysing usage of the web site

If a separate asset is not identifiable, then e.pense when incurred, unless it meets the recognition criteria paragraphs 4D and 99

;.pense when incurred, unless in rare circumstances it meets the criteria in paragraph :', in which and content case the e.penditure is included in the cost of the web site

Ot*e$ M selling, administrative and other general overhead e.penditure unless it can be directly attributed to preparing the web site for use M clearly identified inefficiencies and initial operating losses incurred before the web site achieves planned performance #e.g., false start testing$ M training employees to operate the web site

;.pense when incurred

I!!ust$ tion B I!!ust$ tion /: Int ngib!e Ite& w s not &o$tised nd t*e &o$ti7 tion pe$iod dete$&ined unde$ *int 3#The
depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not e.ceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use$ * s expi$ed,

An intangible item is appearing in the balance sheet of A -td. at 8s. &D la hs as on &393 4DD). The item was acquired for 8s. &D la hs on April &, &''D and was available for use from that date. The enterprise has been following an accounting policy of not amortising the item. Applying the hint, the enterprise determines that the item would have been amortised over a period of Since the amortisation period determined by applying the hint has already e.pired as on &3934DD), the carrying amount of the intangible item of 8s. &D la hs would be required to be eliminated with a corresponding ad/ustment to the opening balance of revenue reserves as on &3934DD). I!!ust$ tion -: Int ngib!e Ite& is being &o$tised nd t*e &o$ti7 tion pe$iod dete$&ined unde$ #The
depreciable amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not e.ceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use$ * s expi$ed,

An intangible item is appearing in the balance sheet of A -td. at 8s. I la hs as on &393 4DD). The item was acquired for 8s. 4D la hs on April &, &''& and was available for use from that date. The enterprise has been following a policy of amortising the item over a period of 4D years on straight3line basis. Applying the hint, the enterprise determines that the item would have been amortised over a period of &D years from the date when the item was available for use i.e., April &, &''&. Since the amortisation period determined by applying paragraph O) has already e.pired as on &3934DD), the carrying amount of 8s. I la hs would be required to be eliminated with a corresponding ad/ustment to the opening balance of revenue reserves as on &393 4DD). I!!ust$ tion 2: A&o$tis tion pe$iod dete$&ined unde$ #The depreciable amount of an intangible asset should be
allocated on a systematic basis over the best estimate of its useful life. There is a

rebuttable presumption that the useful life of an intangible asset will not e.ceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use$ * s not

expi$ed nd t*e $e& ining &o$tis tion pe$iod s pe$ t*e ccounting po!ic' fo!!owed b' t*e ente$p$ise is s*o$te$, An intangible item is appearing in the balance sheet of A -td. at 8s. I la hs as on &393 4DD). The item was acquired for 8s. 4D la hs on April &, 4DDD and was available for use from that date. The enterprise has been following a policy of amortising the intangible item over a period of : years on straight line basis. Applying the hint, the enterprise determines the amortization period to be I years, being the best estimate of its useful life, from the date when the item was available for use i.e., April &, 4DDD. +n &3934DD), the remaining period of amortisation is 4 years as per the accounting policy followed by the enterprise which is shorter as compared to the balance of amortisation period determined by applying the hint, i.e., : years. Accordingly, the enterprise would be required to amortise the intangible item over the remaining 4 years as per the accounting policy followed by the enterprise. I!!ust$ tion <: A&o$tis tion pe$iod dete$&ined unde$ #The depreciable amount of an intangible asset should be
allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not e.ceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use$ * s not expi$ed nd t*e $e& ining

&o$tis tion pe$iod s pe$ t*e ccounting po!ic' fo!!owed b' t*e ente$p$ise is !onge$, An intangible item is appearing in the balance sheet of A -td. at 8s. &I la hs as on &393 4DD). The item was acquired for 8s. 49 la hs on April &, 4DDD and was available for use from that date. The enterprise has been following a policy of amortising the intangible item over a period of &4 years on straight3line basis. Applying the hint, the enterprise determines that the item would have been amortised over a period of &D years on straight line basis from the date when the item was available for use i.e., April &, 4DDD. +n &3934DD), the remaining period of amortisation is ' years as per the accounting policy followed by the enterprise which is longer as compared to the balance of period stipulated in the hint, i.e., ( years. Accordingly, the enterprise would be required to restate the carrying amount of intangible item on &3934DD) at 8s. &O.I la hs #8s. 49 la hs 3 ).8s. 4.9 la hs, i.e., amortization that would have been charged as per the Standard$ and the difference of 8s. &.4 la hs #8s. &I la hs38s. &O.I la hs$ would be required to be ad/usted against the opening balance of the revenue reserves. The carrying amount of 8s. &O.I la hs would be amortised over ( years which is the balance of the amortisation period as per the hint.

I!!ust$ tion 6: Int ngib!e Ite& is not &o$tised nd &o$ti7 tion pe$iod dete$&ined unde$ #The depreciable
amount of an intangible asset should be allocated on a systematic basis over the best estimate of its useful life. There is a rebuttable presumption that the useful life of an intangible asset will not e.ceed ten years from the date when the asset is available for use. Amortisation should commence when the asset is available for use$

has not expi$ed, An intangible item is appearing in the balance sheet of A -td. at 8s. 4D la hs as on &393 4DD). The item was acquired for 8s. 4D la hs on April &, 4DDD and was available for use from that date. The enterprise has been following an accounting policy of not amortising the item. Applying the hint, the enterprise determines that the item would have been amortised over a period of &D years on straight line basis from the date when the item was available for use i.e., April &, 4DDD. +n &3934DD), the enterprise would be required to restate the carrying amount of intangible item at 8s. &9 la hs #8s. 4D la hs 3 ).8s. 4 la hs, i.e., amortization that would have been charged as per the Standard$ and the difference of 8s. O la hs #8s. 4D la hs3 8s. &9 la hs$ would be required to be ad/usted against the opening balance of the revenue reserves. The carrying amount of 8s. &9 la hs would be amortised over ( years which is the balance of the amortisation period as per the hint.

Cip! =s )$oducts inc!ude: )* $& ceutic !s: "ipla manufactures anabolic steroids, analgesicsNantipyretics, antacids, anthelmintics, anti3arthritis, anti3inflammatory drugs, anti3TA drugs, antiallergic drugs, anticancer drugs, antifungal, antimalarials, antispasmodics, antiulcerants, immunosuppressants etc, Ani& ! >e !t* C $e )$oducts: These include0 aqua products, equine products, poultry products, products for companion animals, and products for livestoc animals. OTC: These include0 child care products, eye care products, food supplements, health drin s, life style products, nutraceuticals & tonics, s in care products, and oral hygiene products. F! vou$ ? F$ g$ nce: "ipla manufactures a wide range of flavours, which are used in foods and beverages, fruit /uices, ba ed goods, and oral hygiene products. "ipla fragrances have wide ranging applications such as in personal care products, laundry detergents and room fresheners. # jo$ Ac*ieve&ents of Cip! :

2anufactured ampicillin for the first time in India -auched etoposide, a brea through in cancer chemotherapy, in association with Indian Institute of "hemical Technology -aunches transparent 8otahaler, the world?s first such dry powder inhaler device -aunches transparent 8otahaler, the world?s first such dry powder inhaler device Aecame the first company, outside the >SA and ;urope to launch "1"3free inhalers

1ollowing pages reveals the Aalance Sheet & ,rofit & -oss Account of "hemical, Industrial & ,harmaceutical -aboratories. #"I,-A$ )$ofit ? :oss ccount in Rs, C$, # $ =.< # $ =.6 # $ =.@ # $ =.A # $ =.B

Income Sales Turnover ;.cise 5uty =et Sales +ther Income Stoc Ad/ustments Total Income ;.penditure 8aw 2aterials '').D: &,&''.( O &,:O9.& & &,(:9.I ' 4,&O4.9 I 4,D::.9 4 &)4.)' &,'4).D ) 4:.'4 34D.O& &,'4I.) 9 4,9DD.I ' &9O.)( 4,4:9.: 4 (O.D) OO.I( 4,)'(.9 4 ),&D).O 4 &44.4( 4,'I&.) : &&4.4D '9.): ),&I(.' D ),O:O.' 4 '9.') ),:O&.' ' &DD.OI 3)D.() ),O)&.' 9 9,4').' : 'D.OO 9,4D).4 ' &)9.'4 9&.)( 9,)('.: I

,ower & 1uel "ost ;mployee "ost +ther 2anufacturing ;.penses Selling and Admin ;.penses 2iscellaneous ;.penses ,reoperative ;.p "apitalised Total ;.penses

4I.:I ':.4:

)(.4' &&O.:I

O).DI &:D.(O

IO.(& &I9.:'

'O.'D 4::.9:

&49.49

&)I.(4

&(D.O)

&IO.9(

4)).'D

4&4.D) 4O.I'

4((.'I 9:.((

):9.)) (I.'D

9&I.)9 (I.9)

:9(.&D 'O.OO

D.DD &,9ID.D 9

D.DD &,I&O.& D

D.DD 4,)I&.I &

D.DD 4,(D'.9 )

D.DD ),)'4.9 '

+perating ,rofit ,A5IT Interest ,A5T 5epreciation +ther Eritten +ff ,rofit

944.)I 99I.) &).9I 9)9.I4 9D.4I D.& )'9.99

:D:.4' :I&.)4 &&.O( :O'.O: ::.D: D :&9.O

O').I' IDO.D' &O.D( ('D.D4 ID.&I D (D'.I9

I4&.I) '44.:& &&.&O '&&.): &D).)( D ID(.'I

I:4.&( 'I(.D' &I.D: 'O'.D9 &)D.OI D I)I.)O

Aefore Ta. ;.tra3 ordinary items ,AT #,ost ;.tra3ord Items$ Ta. 8eported =et ,rofit Total Palue Addition ,reference 5ividend ;quity 5ividend "orporate 5ividend Ta.

3&&.&

)I).)9 I(.(: )DO.O' 9IO.'' D I'.'O

:&9.O &D: 9D'.O& O&O.)) D &D9.'O

(D'.I9 &D4.4 OD(.O9 I&(.( D &::.9O

ID(.'I &)'.': OOI.D)

I)I.)O &)O.') (D&.9)

':9.:9 &,4)D.D& D &::.9O D &::.9O

&&.:)

&9.':

4&.I

4O.94

4O.94

Shares in issue #la hs$ ;arning ,er Share #8s$ ;quity 5ividend #Q$ Aoo Palue #8s$ B ! nce S*eet

:''.(4 :&.&9

4,''I.(D &).OO

4,''I.(D 4D.4O

(,((4.'& (,((4.'& I.:' '.D4

&:D 4D'.D( in 8s. "r.

&(: :&.9(

&DD O:.I)

&DD 9&.:4

&DD 9I.4

# $ =.<

# $ =.6

# $ =.@

# $ =.A

# $ =.B

Sources +f 1unds Total Share "apital ;quity Share "apital Share Application 2oney ,reference Share "apital 8eserves 8evaluation 8eserves =etworth Secured -oans >nsecured -oans Total 5ebt Total -iabilities :'.'( :'.'( :'.'( :'.'( :'.'( :'.'( &::.9O &::.9O &::.9O &::.9O

D.DD D.DD &,&').' D &D.&I &,4O9.D : )D.OD &('.'' 4&D.:' &,9(9.O 9

D.DD D.DD &,9I).O D &D.DO &,::).O ) 9D.)( &:9.O( &':.D9 &,(9I.O (

D.DD D.DD &,'&).' I '.)4 &,'I).4 ( :&.4( 9&(.O9 9OI.'& 4,9:4.& I

D.DD D.DD

D.DD D.DD

),D(&.I 9 ),:'&.)' I.'( I.'(

),4)O.4 ( ),(::.I4 (.4: &&O.)& &4).:O &O.'I :O).:: :ID.:)

),):'.I ) 9,))O.): # $ =.B

# $ =.< # $ =.6 # $ =.@ # $ =.A

Application +f 1unds 7ross Aloc (9D.(' 'IO.O( &,)OO.O ( &,(''.( & 4,4D&.('

-ess0 Accum. 5epreciation =et Aloc "apital Eor in ,rogress Investments

&').4) :9(.:O :O.D& &ID.)(

49(.(O ()I.'& &D:.'O &I.)D

)&D.DO &,D:O.O & I(.D& 44.9)

9&&.O9

:9D.9)

&,)II.D ( &,OO&.)O ().&' &&(.ID 4)).&4 '9.(:

Inventories Sundry 5ebtors "ash and Aan Aalance Total "urrent Assets -oans and Advances 1i.ed 5eposits Total "A, -oans & Advances 5effered "redit "urrent -iabilities ,rovisions Total "- & ,rovisions =et "urrent Assets

:OI.'9 9'I.4) : &,D(4.& ( )O4.I4 &.4: &,9)O.4 9 D 99&.) )D9.49 (9:.:9 O'D.(

(9:.OI :I(.)4 &:.)( &,)9I.) ( 9D9.:& D.D& &,(:4.I ' D :I).9 4I).'' IO(.)' II:.:

':( I(:.'O 99.9: &,I((.9 & 9&9.I9 D.D) 4,4'4.4 I D ()).I9 4(4.)& &,DDO.& : &,4IO.& )

'(I.O &,&4D.9' &,D4I.( I &,)').'& :O.)) ('.&4

4,DO).( & 4,:').:4 O':.I& &,&:D.)D (:.&O D.&O

4,I)9.O I ),(9).'I D O9).(I 9&D.&) D 'ID.D: 9&O.I&

&,D:).' & &,)'O.IO &,(ID.( ( 4,)9(.&4

2iscellaneous ;.penses Total Assets "ontingent -iabilities Aoo Palue #8s$ FINDIN"S: i, B sis of Accounting

D &,9(9.O 9 99I.:( 4D'.D(

D &,(9I.O ( :D).II :&.9(

D 4,9:4.& I &,ODD.( : O:.I)

),):'.I ) 9,))O.): &,:IO.O 9 &,OO9.:I 9&.:4 9I.4

The financial statements are prepared under the historical cost convention in accordance with the applicable mandatory accounting standards and relevant provisions of the "ompanies Act, &':O. ii, Fixed Assets 1i.ed Assets are stated at cost of acquisition #net of recoverable ta.es & 7overnment grants wherever availed$ or construction or other amounts substituted for historical costs on revaluation less accumulated depreciation. iii, Dep$eci tion a. 5epreciation on fi.ed assets is provided on the Straight -ine 2ethod at the rates and in the manner prescribed under Schedule BIP to the "ompanies Act, &':O. b. All individual items of fi.ed assets, where the actual cost does not e.ceed 8s. :,DDD each have been written off entirely in the year of acquisition. c. "ost of leasehold land including premium is written off over the period of lease.

iv, Invento$ies 8aw materials are valued at lower of cost and net realisable value. <owever, these items are considered to be realisable at cost if the finished products, in which they will be used, are e.pected to be sold at or above cost. Eor 3in3process and finished goods are valued at lower of cost and net realisable value. 1inished goods and wor 3in3process include costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

"ost of inventories is computed on weighted average basis. v, Fo$eign %xc* nge T$ ns ctions Transactions in foreign currencies are recorded at the e.change rates prevailing on the date of the transaction. 1oreign currency monetary assets & liabilities and forward contracts are restated at year end e.change rates. ;.change differences arising on the settlement of foreign currency monetary items or on reporting "ompany*s foreign currency monetary items at rates different from those at which they were initially recorded during the year or reported in the previous 1inancial statements are recognised as income or e.pense in the year in which they arise. In respect of forward contracts, the premium or discount on these contracts is recognised as income or e.penditure over the period of the contract. Any profit or loss arising on cancellation or renewal of such contracts is recognised as income or e.pense for the year. vi, Reti$e&ent Benefits . The "ompany contributes to a 7ratuity 1und, which has ta en up group policies with insurance companies for future payments of gratuities to employees. The contributions are based on actuarial valuation. b, The "ompany provides for -eave ;ncashment Aenefit on the basis of actuarial valuation. vii, Rese $c* nd Deve!op&ent 8evenue e.penditure on 8esearch and 5evelopment is charged against profit of the year in which it is incurred. "apital e.penditure on 8esearch and 5evelopment is shown as addition to 1i.ed Assets. viii, %xpenditu$e on Regu! to$' App$ov !s ;.penditure incurred for obtaining regulatory approvals and registration of products for overseas mar ets is charged to revenue. ix, Invest&ents -ong term investments are stated at cost, less any provision for permanent diminution in value. "urrent investments are stated at lower of cost and fair value. x, Revenue Recognition The "ompany recognises sales at the point of despatch of goods to the customers. 8oyalty, technical now3howNfees and licensing income are recognised as revenue, when earned, in accordance with the terms of the relevant agreements. xi, Inco&e T x

,rovision for ta. for the year comprises current income ta. determined to be payable in respect of ta.able income and deferred ta., being the ta. effect of timing difference, representing the difference between ta.able income and accounting income that originate in one period and are capable of reversal in one or more subsequent period#s$. In cases where the ta. assessments have been completed but the appeals are pending at various appeal for a, the ta. payments have been set3off against the provisions in the Aalance Sheet. Appropriate disclosures have been made towards contingent liabilities, if any. xii, I&p i$&ent of Assets At each Aalance Sheet date, the "ompany assesses whether there is any indication that any asset may be impaired. If any such indication e.ists, the carrying value of such assets is reduced to its estimated recoverable amount and the amount of such impairment loss is charged to ,rofit and -oss Account. If, at the Aalance Sheet date there is an indication that a previously assessed impairment loss no longer e.ists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount sub/ect to a ma.imum of depreciated historical cost. DISCUSSIONS 1rom the above study, I can say that the company may or may not follow all of the Accounting Standards, but it depends upon the types of the operations & financial transactions of the company. In "hemical, Industrial & ,harmaceutical -aboratories. #"I,-A$ I found that out of 4' Accounting Standards, the standards they follow are AS&, AS4, ASO, ASI, AS', AS&D, AS&&, AS&), AS&:, AS&', AS4D, AS44, AS4O, AS4I, etc. As given above these different accounting standards deals with different issues. 1or eg. AS& deals with 5isclosure of Accounting ,olicies6 As4 deals with Paluation of Inventories etc. =ow days, Accounting Standards are used as compulsory regulatory mechanisms for the preparation of general3purpose financial reports & subsequent audit of the same, in almost all countries of the world. So that, by using these accounting standards the uniformity in the accounting policies can be achieved.

CONCLUSION
Through this study of accounting of intangibles Assets, I understood the importance of Accounting Standards in the business enterprise. 1urther, I can say that, the aim of setting

standards is to bring about uniformity in financial reporting & to ensure consistency & comparability in the data published by the enterprises.

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