Accounting · Accounting Standards
A large public sector bank undergoes a 'Digital Transformation' and spends 500 Crores on cloud infrastructure and AI algorithms. 200 Crores of this was spent on 'Training Staff' and 'Researching' various AI models that were eventually rejected. The bank has a 'Contingent Asset' of 100 Crores from a won court case currently under appeal. Which of the following is correct regarding accounting treatment under Accounting Standards (AS)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A change in the depreciation method from SLM to WDV is a routine change in accounting policy and requires no justification.
- 2Training and research costs must be expensed; only development costs of successful projects can be capitalized under AS 26.✓
- 3The bank should recognize the 100 Crore contingent asset in the balance sheet to show accurate performance success.
- 4The bank can capitalize the training and research costs as they are part of the core digital transformation strategy.
Correct answer
Training and research costs must be expensed; only development costs of successful projects can be capitalized under AS 26.
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