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    Question

    A company purchases an intangible asset (software

    license) for ₹20 lakhs, with a legal validity of 5 years and probable economic benefit of 8 years. As per accounting principles, over what period should the asset be amortized?
    A 5 years Correct Answer Incorrect Answer
    B 8 years Correct Answer Incorrect Answer
    C 10 years Correct Answer Incorrect Answer
    D At management discretion Correct Answer Incorrect Answer
    E Amortization not allowed Correct Answer Incorrect Answer

    Solution

    As per Ind AS 38, an intangible asset should be amortized over the shorter of legal or economic life. Here, 5 years is the legal life and hence becomes the amortization period.

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