As per para 41 of AS 26 ‘Intangible
Assets’, no intangible asset arising from research should be
recognized. The expenditure incurred on development phase can be
deferred to the subsequent years if the company can demonstrate all of
the following conditions (as specified in para 44 of AS 26 ‘Intangible
Assets’):
(a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
(b) its intention to complete the intangible asset and use or sell it;
(c) its ability to use or sell the intangible asset;
(d) how the intangible asset will generate probable future economic benefits. Among other things, the enterprise should demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset;
(e) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
(f) its ability to measure the expenditure attributable to the intangible asset during its development reliably.