Schedule III Intangible Assets: Track Development and Amortisation

A company incurs ₹12 lakh on a software project across research and development activities. The useful result is a working that explains the facts, the calculation or classification, and the evidence behind the conclusion. This guide shows how to prepare that working and where a reviewer should investigate before accepting the result.

Scope and applicable period

Financial reporting for FY 2025–26 under the applicable Accounting Standards (AS) framework. Assess entity-specific applicability and relief. Ind AS requirements are a separate analysis.

Verification date: 11 October 2026. Figures and rates identified as assumptions are teaching examples; apply the stated conditions and the actual facts to a real assignment.

The key principle

AS 26 distinguishes research expenditure from development expenditure that satisfies all recognition criteria. A software project budget or management's intention to complete it is not sufficient on its own. Establish identifiability, control, expected benefits and the development criteria, including reliable measurement. Previously expensed amounts cannot simply be reinstated as an asset because the project later succeeds.

Worked example

Record the date when all relevant criteria are met and distinguish costs incurred before and after it. Build a project-cost allocation from timesheets, invoices and direct attributable expenditure. Review the useful life, available-for-use date and amortisation policy under the standard. Reconcile additions and amortisation with the intangible note and separate any intangible assets under development disclosures. Do not use the desired profit result to select which costs are capitalised.

A practical sequence

Confirm the applicable standard, identify the nature of the expenditure and separate research from qualifying development. Document when recognition criteria were first met and include only eligible subsequent costs.

Assess useful life and amortisation, then reconcile opening balance, additions, expense and closing amount. Retain evidence supporting technical feasibility and economic benefits.

Do not capitalise previously expensed research simply because the project later succeeds or management wishes to improve current profit.

Choose the framework before drafting the note

Recognition, measurement, presentation and disclosure are related but distinct. First establish whether the entity follows AS or Ind AS and whether company Schedule III or ICAI non-corporate guidance governs presentation. Then determine the accounting treatment and assemble the applicable disclosure. A well-formatted note cannot cure an unsupported asset, liability or income figure. Reconcile note schedules to the trial balance and preserve comparative information. Where relief applies to an entity, assess the particular standard or guidance rather than assuming that small size removes every requirement. Record significant judgement with the supporting facts.

Evidence checklist

Keep the following records linked to the same entity, period and working version. Identify missing items explicitly; a checked box should mean the document was examined and supports the stated conclusion.

• Project research/development chronology
• Technical and commercial feasibility support
• Resource and benefit evidence
• Cost records from the recognition date
• Useful-life, readiness and amortisation working

Common mistakes and how to avoid them

• Capitalising the entire project because funding is approved. Compare the conclusion with the project research/development chronology and resolve any conflicting facts.
• Reinstating earlier expensed research on later success. Trace the affected item to the resource and benefit evidence before finalising the working.
• Allocating costs without reliable project evidence. Use the useful-life, readiness and amortisation working to make the final position and remaining exceptions clear.

Before you finalise

Recheck the example’s assumptions against the actual assignment, resolve the identified exceptions and make the final figure or conclusion traceable to its source. Preserve the reviewed version and the reason for material changes. For this task, the useful-life, readiness and amortisation working should agree with the conclusion presented to the client, reviewer or authority.

Frequently asked question

Does developing software always create an intangible asset? No. The applicable recognition criteria and evidence determine which expenditure, if any, qualifies.

Sources and further reading

• ICAI Accounting Standard AS 26
• Schedule III, Companies Act, 2013 — India Code

Related guide: Schedule iii division i financial statements.