Economics · Accounting Standards and Intangible Assets (AS 26)
According to the principles of accounting and the specific guidelines of AS 26 (Intangible Assets), how should costs incurred during the 'Research Phase' of a new product development project be treated in the final accounts?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1They should be added to the cost of inventory if related to existing product improvement.
- 2They must be recognized as an expense in the Profit and Loss Account in the period incurred and cannot be capitalized.✓
- 3They should be treated as deferred revenue expenditure and amortized over five to ten years.
- 4They should be capitalized as an intangible asset and shown in the Balance Sheet if profitable.
Correct answer
They must be recognized as an expense in the Profit and Loss Account in the period incurred and cannot be capitalized.
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