Direct answer
Under Ind AS 38, derecognise an intangible on disposal or when neither use nor disposal is expected to generate future economic benefits. The gain or loss is net disposal proceeds less the carrying amount, normally recognised in profit or loss; a gain is not revenue. Sale-and-leaseback requirements can change the analysis. A system marked inactive is not automatically an asset with no future benefits. First establish the derecognition event, then calculate the amount. ICAI: Ind AS 38, paragraphs 112–118, including disposal timing, replacement parts and reacquired rights.
Applicable framework and reporting population
This article addresses entities applying Ind AS and the disposal provisions in paragraphs 112–117 of Ind AS 38, checked against ICAI’s 2025–26 compendium on 27 October 2026. It is not a tax block-of-assets computation or an AS 26 guide. Link the relevant paragraphs to the disposal contract, the asset register and the disclosure reconciliation. The worked models assume no tax, foreign-exchange, revaluation-surplus or sale-and-leaseback complications; those matters require separate analysis when present.
Establish the date and transaction price
Paragraph 114 links disposal timing to the recipient obtaining control using the Ind AS 115 performance-obligation framework. Paragraph 116 refers to its transaction-price requirements, including subsequent changes. Thus a cash receipt, a signed letter of intent and a transfer of control may occur on different dates. Prepare a dated evidence schedule before removing the asset. The simple examples assume fixed consideration and that control has transferred; they do not resolve variable consideration, significant financing or contingent receivables.
Reconcile carrying amount to the disposal date
Start from the identified asset’s gross carrying amount and reconcile accumulated amortisation and impairment to the relevant date. A trial balance total for all software is insufficient where only one licence or component is disposed of. Distinguish the sale proceeds from disposal costs so the net figure is transparent. Verify that receipts exclude unrelated service fees, deposits or taxes collected for others. In the models, stated disposal costs are assumed directly attributable and properly included in net disposal proceeds.
Retirement is different from temporary idleness
Paragraph 117 does not stop finite-life amortisation merely because use ceases, unless the asset is fully amortised or falls within the specified Ind AS 105 held-for-sale treatment. A pause in deployment therefore calls for an assessment rather than an automatic write-off or amortisation holiday. If the evidence establishes no expected benefit from either use or disposal, paragraph 112 supports derecognition. If benefits remain but recovery is doubtful, assess the separate impairment framework before treating the asset as extinguished.
Remove the replaced part when the new part is recognised
Paragraph 115 addresses replacement costs recognised under the asset-recognition principle: derecognise the replaced part’s carrying amount. Where that amount is impracticable to determine, the paragraph permits replacement cost as an indication of the old part’s original cost, not an automatic assertion that the old carrying amount equals today’s replacement invoice. Estimate and support the old cost, accumulated amortisation and impairment consistently. A replacement payment itself does not prove that the new expenditure qualifies for recognition.
Close the disclosure and journal-entry bridge
Paragraph 118 requires the class-level carrying-amount reconciliation, including disposals and other relevant movements. Tie the asset removed, accumulated amounts released, receivable or cash, disposal costs and gain or loss to that reconciliation. Keep a reacquired right sold to a third party identifiable: paragraph 115A brings its carrying amount into the reissue result. The reviewer should be able to reproduce the gain without treating gross receipts as revenue or leaving the sold component embedded in the surviving asset.
Applicable primary references
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Software sale with a gain
An identified software asset has cost ₹12,00,000, accumulated amortisation ₹8,00,000 and accumulated impairment ₹1,00,000 at transfer of control. Carrying amount is ₹3,00,000. Fixed proceeds of ₹4,50,000 less qualifying disposal costs ₹30,000 give net proceeds ₹4,20,000. Gain is ₹1,20,000. Present the result under the applicable profit-or-loss classification, not as revenue merely because cash was received.
Illustrative example 2: Licence sale below carrying amount
Cost is ₹9,00,000, accumulated amortisation ₹4,50,000 and impairment ₹50,000, leaving ₹4,00,000. Sale proceeds ₹3,80,000 less qualifying disposal costs ₹20,000 produce net proceeds ₹3,60,000. The disposal loss is ₹40,000. Using gross sale proceeds instead would understate the model’s loss by ₹20,000.
Illustrative example 3: Abandonment with no use or disposal benefits
A project right has cost ₹6,40,000 and accumulated amortisation ₹2,40,000, with no accumulated impairment. Supported evidence establishes that neither further use nor disposal will generate benefits and proceeds are nil. The carrying amount of ₹4,00,000 is removed, producing a ₹4,00,000 loss. A management label saying obsolete would not replace the documented benefits assessment.
Illustrative example 4: Idle software with benefits still expected
A finite-life asset has cost ₹7,20,000 and accumulated amortisation ₹3,60,000, leaving ₹3,60,000 over a remaining 36 months under a supported straight-line estimate with nil residual value. It is idle for six months, is not held for sale and still has expected benefits. Monthly amortisation remains ₹10,000; six months charge ₹60,000 leaves ₹3,00,000, assuming no impairment or estimate change. No automatic derecognition follows from idleness.
Illustrative example 5: Replacement of an identified component
The whole asset’s opening carrying amount is ₹8,00,000. A replaced part has original cost ₹2,00,000 and accumulated amortisation ₹1,20,000, leaving ₹80,000. A new part costing ₹3,40,000 is assumed independently to meet recognition requirements. Remove ₹80,000 and add ₹3,40,000: the asset becomes ₹10,60,000 before further amortisation or impairment. With no disposal proceeds for the old part, its removal produces an ₹80,000 loss. Keeping both parts would overstate the asset by ₹80,000.
Illustrative example 6: Reacquired right subsequently sold
A recognised reacquired right has a supported carrying amount of ₹2,10,000 at sale to a third party. Fixed consideration is ₹2,75,000 and qualifying disposal costs are ₹15,000. Net proceeds are ₹2,60,000; the gain is ₹50,000. The related carrying amount enters the reissue result rather than remaining in the intangible register after the right is sold.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the accounting framework | Ind AS applicability and relevant asset category. |
| 2 | Identify the particular asset or component | Register identifier, rights documentation and gross cost history. |
| 3 | Establish the derecognition event | Disposal or no-benefits assessment with dated supporting evidence. |
| 4 | Determine control-transfer timing | Executed contract, transfer evidence and Ind AS 115 analysis. |
| 5 | Update carrying amount to that date | Amortisation, impairment and prior-movement reconciliation. |
| 6 | Validate consideration and net disposal costs | Price analysis, receipts/receivable and cost support. |
| 7 | Review idle and held-for-sale cases separately | Benefits assessment, Ind AS 105 review and amortisation decision. |
| 8 | Remove replaced parts where appropriate | Old-component estimate and new-recognition analysis. |
| 9 | Recalculate and classify the result | Net proceeds less carrying amount and journal-entry bridge. |
| 10 | Reconcile class disclosures and residual records | Disposal movement, surviving register and supporting review file. |
Sixteen practitioner FAQs
1. Does an inactive software flag establish derecognition?
Investigate the underlying rights and expected benefits. A status label alone does not establish disposal or absence of future benefits.
2. What is the basic disposal calculation?
Subtract the carrying amount at derecognition from net disposal proceeds, after establishing the correct inputs and event.
3. Can the gross receipt be presented as revenue?
Paragraph 113 says the derecognition gain is not revenue. Separate any distinct transaction elements before computing the asset result.
4. Does every disposal result go through the simple model?
Sale and leaseback has a specific qualification. Other facts, including variable consideration, can also need additional analysis.
5. Is the bank receipt date necessarily the disposal date?
Examine when the recipient obtains control under the referenced Ind AS 115 framework. Retain the timing evidence.
6. Why use the carrying amount at the disposal date?
An outdated year-opening balance can omit intervening amortisation, impairment or other valid movements.
7. Does temporary idleness stop amortisation?
Paragraph 117 does not permit cessation solely for non-use, subject to its stated fully-amortised and held-for-sale qualifications.
8. When can a no-proceeds retirement produce a loss?
Where the derecognition conditions are established, a remaining carrying amount with nil proceeds produces a negative result in the simple model.
9. Should possible future sale proceeds be ignored in an abandonment assessment?
Assess both use and disposal benefits before concluding that neither remains. Document the evidence behind any nil-proceeds assumption.
10. Can impairment review be replaced by a disposal entry?
Establish the event first. Doubtful recovery of an asset with continuing benefits is not automatically the same as derecognition.
11. What happens to the old part when a replacement is recognised?
Paragraph 115 requires removal of the replaced part’s carrying amount. Keep that component calculation distinct from the new addition.
12. Does today’s replacement cost always equal the old carrying amount?
No. The paragraph’s estimation permission concerns an indication of original cost where determination is impracticable; accumulated consumption and impairment still matter.
13. Does paying for an upgrade prove the new asset qualifies?
Apply the recognition principle independently. The replacement illustration expressly assumes that assessment is satisfied.
14. How is a sold reacquired right treated?
Include its related carrying amount in the reissue result under paragraph 115A and reconcile its removal from the register.
15. Is this also the income-tax disposal computation?
No. Maintain a separate tax analysis rather than substituting the Ind AS asset gain for a statutory tax calculation.
16. What final exhibit should the reviewer request?
A disposal-date bridge from gross cost and accumulated amounts to net proceeds, gain or loss, journal entries and the class reconciliation.
Conclusion
Calculate intangible disposal gains and losses under Ind AS 38, distinguish idle assets from derecognition, and reconcile replaced parts and disposal proceeds.
Sources and primary references
Official Gazette: Companies (Indian Accounting Standards) Amendment Rules, 2026, 12 August 2026.