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    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?
    A Capitalise entire ₹80 crore as intangible asset. Correct Answer Incorrect Answer
    B Expense ₹50 crore; capitalise ₹30 crore as development intangible. Correct Answer Incorrect Answer
    C Capitalise ₹50 crore; expense ₹30 crore. Correct Answer Incorrect Answer
    D Expense all as R&D. Correct Answer Incorrect Answer
    E Defer as pre-operative expenditure. Correct Answer Incorrect Answer

    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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