Question
A pharma company spends ₹50 crore on early-stage drug
molecule research (feasibility not established). Later spends ₹30 crore proving commercial viability and securing regulatory approval. How should costs be treated?Solution
Research phase = expense (knowledge creation, feasibility uncertain). Development phase (technical feasibility, intent to use, future benefits probable) = capitalise. Hence expense ₹50 crore, capitalise ₹30 crore.
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