 Today's program is we will be covering three standards, 26, 28 and 29. Before that, any questions relating to any standards which have been covered in the last four days? There are two kinds of, one is forex received, amount received in forex and amount of expenses incurred in forex. Now, in case of expenditure, the product can be the fixed asset or the revenue expenditure. Fixed asset like case study or books and for revenue expenditure it can be subscription. When I am sending the remittance, we incur some bank charges. So the amount of bank charges debited by the bank should be charged to the item or it should be debited to the bank charges separately in the accounts. What the standard says? Okay, any bank charges which is not related to fixed assets should go to bank charges or financial charges or expense account. Not related to fixed assets. Okay, something which is related to fixed assets especially those fixed assets which take time to get installed that CWIP process and all that. Only that kind of bank charges can be added to your cost of asset otherwise it should ideally be taken to expenditure. If it is finished goods, guidance thing then ideally it should be debited to bank charges. Finished goods means books, books. Books is your fixed asset, right? Fixed asset, whether the bank charges should be charged to the book in that case. No. In case of CWIP kind of thing. Yes, books is something which you have bought and you have kept. So cost of that book should not be increased by bank charges. And in case of income similarly gross approach should be applied. Yes. Bank account debit, bank charges separately debit to income, something like that. Right, right, right. Gross income should be booked as income and bank charges should be as expense. Okay, thank you. Architectural consultancy fee. Architectural consultancy fee in case of? In case of construction of building, this drawing fees and all should be added to the cost of the building. While discussing AS 12, government grants. Yes. There was an area of charging depreciation on assets acquired out of government grants. And there you said that the depreciation should not be charged. The assets acquired of government grant, the depreciation on assets acquired out of government grant should not be charged to income expenditure account. That's what you said. I said depreciation should be charged and then the deferred revenue expenditure should also be credited to PNL. Now it should be knocked off. Both should be in the same account. Okay. Now then someone said that government requires us to keep it separate. So in that case if it is required by some regulator or government to keep it separate, you can keep it separate. But both should go to PNL. Your depreciation on fixed asset and your deferred revenue grant income. Supposing the depreciation is directly taken to income and expenditure account without deferred revenue expenditure. What's wrong with this? No, wrong is see that fixed asset you have received a specific grant against that fixed asset. Okay. Because you have received specific grant against that fixed asset, that grant should ideally be income for me because I have received it. Now that income is not of that year. Income is spread over the years over which you are using the fixed asset. So as you charge depreciation on the fixed asset, similarly you should book income over the periods over which you charge depreciation and in the same proportion. So both should go simultaneously to your income and expenditure account. No, if the justification for charging depreciation is that the assets whether acquired out of government grant or acquired out of other sources, once the assets are merged into the industry, the assets contribute in generating the revenue for the year. Say fees from students because the capacity is increased and more students are coming. So fees is increasing. On the basis of matching grant, sorry matching principle. One second, one second. I have five areas in my financial statements. Okay. Fine. Now when I receive a grant for a specific fixed asset. Okay. When I buy the fixed asset, it goes to assets. That is fine. When I get a grant for fixed assets, it should be one of these five, it should go to one of these five areas. Right. Which area will it go to? Capital. Capital. Capital only includes something which is as I said proprietor's fund or promoter's contribution, such kind of thing. Now when you receive grant for fixed assets, which is a specific fixed asset, it is not a kind of promoter's contribution. That classification is incorrect. The only place it can go to is income. Now it is not my that year's income. If it would have been my that year's income, as in case of revenue grant, I would have taken it to income directly. But that income is for next five years or 10 years. Because the income is for next five years or 10 years, that benefit of that income I will get for next 10 years. I should charge that income over 10 years. Hence I should take it to deferred revenue grant, which is first my liability and then I should transfer to income every year. That is the logic behind doing that. Capital will include only something which is in the nature of promoter's contribution. So at the time of purchasing or acquiring the asset, the practice that grant to the extent utilized for acquiring asset is transferred to capital. Is that practice is not correct? I said in the first day itself it's not to be taken to capital fund. It should be taken to deferred revenue. And then from deferred revenue it should be taken to income. It is not your capital fund. It is not your capital. It is not a promoter's contribution. In the case of capital, there will be no capital. Capital. Equity or anything like that. There would be nil capital in all the institutions. Right. And everything will be routed through that. Then everything will be your liability. Liability in asset. You might not have that third thing. Whatever money we are receiving from government that will be income. Whether in which form? Revenue income. Then your capital will include reserves and surplus. Yes. Only reserves and surplus. Only reserves and surplus. Fine. But just because you don't have a promoter's contribution, you only have reserves and surplus, you don't make something which is your income as your capital. Because in case of government, concept of promoter does not exist at all. There is no promoter. In case of company, we have promoter. But in institutions, government has constructed this. So government is promoter. But we are not taking anything in capital. So I think capital will be nil in all the institutions. Right, sir. Right, sir. This will go to deferred revenue grant only. Otherwise, your expenditure and income account will show a deficit of that depreciation amount, which is also incorrect. If you put that in your capital fund and you charge depreciation to PNL, then you don't have a credit in front of the depreciation and then the depreciation will be shown as loss, which is not correct. So both should go to your PNL or nil should go. Nil should go means my fixed asset and this. My fixed asset will be represented at nominal value of rupees 1. So I should do that. That means depreciation should not go to PNL or depreciation and deferred revenue both should go to PNL. If you are taking the value of assets rupees 1, when it is purchased on the basis of government grant, then I think 90-95% cases of assets will be rupees 1. In that case, depreciation will also be almost nil. Almost nil, yes. But my net income and expenditure account will show a proper... That will show. But so far, depreciation is concerned. I think depreciation would be... So that is why both the options are... Almost nil and almost all the organizations, because I think the organization which are participating in this workshop mostly 100% funded by government of India. Right, sir. Hence, AS-12 allows you both the approach. One approach is you show both fixed assets and deferred revenue at gross value. The other option is you show it at net value. Both approaches allowed and both approaches right. You can follow any of the approach you think is reflecting your proper financial conditions. Assets to passing through the building. Yes. Buildings and all. Buildings and computers and furniture, everything. Why? Land. No, no. When building is being constructed by the fund provided by government, we are not incurring then cost would be rupees 1. If building is constructed by the fund given by the government, then what cost we will take for the building? No sir, then you show on both the sides right. Building whatever see amount will be given specifically for building construction. So if my building construction has costed me some say 1 crore rupees. So my fixed asset will show 1 crore and my deferred revenue fund will show 1 crore or building fund will show 1 crore which should be kind of deferred revenue expenditure and then you should transfer from that fund to income every time you charge depreciation on the building. And then a major furniture instrument and all? Furniture will go to furniture or you know if there is any fixed interiors that will form part of building. If furniture can be removed or furniture can be dismantled or something like that, furniture will be capitalized as furniture. Now if you have received grant against furniture also then again there should be a deferred revenue grant for furniture. What about the instruments? Same for any asset. The logic is same for any asset. Okay. What kind of intangible assets do you encounter in your institutions? Patents, copyrights, trademarks, fine. E-journal, is it a software or intangible asset? Is it a intangible asset? Okay. What is an intangible asset? Which is not visible, cannot be touched. Okay. What is an asset? It is procured for producing goods or providing services and is not held for sale in the ordinary courts of business. That is asset. So there is future economic benefit. Okay. Future means more than one year. You have control over it. That means you can decide when to use, how to use. And it is not held for sale in ordinary course of business. If these three conditions are fulfilled, basically not held for sale is for fixed asset or intangible asset only. Asset will be only for these two. There is a future economic benefit and there is a control. Okay. Now, tangible assets are something which can be seen. Our question is still not solved. My question is e-journal and database subscription, whether it is software. That is why I explained what is the intangible kind of thing. So first you will have to tell me whether there is a future economic benefit arising out of an e-journal. Is there a future economic benefit? Future economic benefit means what? In terms of research, definitely it is a future economic benefit. Can you measure that future economic benefit? Because it is intangible. No. A specific value. No, no. Just because it is intangible, you cannot come up with a specific value that is not correct. The intangible assets can be of two types. One is internally generated. One is externally acquired. Okay. When it is internally generated, you should recognize anything as intangible asset only if a future economic benefit can be measured and it has a market outside. That means you can sell it in future. Okay. Only then and then only you can recognize or you should recognize an intangible asset. So if I generate a software internally, suppose I make a software internally of my own institution. Okay. Now that software can be capitalized if you know that what is the benefit I am going to acquire in future. So I will be using that software for next five years. Okay. So I know that there is a benefit of five years for next five years I have that benefit. Now when I make that software, I know how much cost goes into it. So suppose that making of that software costed me 1.5 lakhs. So I know I will make that software only if the benefit is at least 1.5 lakhs in the next five years. So I can measure that future economic benefit. What about research? Research cannot be conclusive. It may be successful, may not be successful based upon that general. So research is never capitalized. Research has to be expended out. Immediately. So let me tell you internally generated intangible asset. There is a research phase and there is a development phase. Research phase has to be expended out immediately. No deferment, no nothing, same here in which you incur. Development phase you have to capitalize. Now who decides when the research phase ends and when the development phase starts? How will you come to know when the research phase has ended and when the development phase has started? Simply when the product is... When you know that it is feasible. So I know that I have done the research. I know that I have to make the product in this format or a macro level or a design is there. And I know that it can be done and then it will be useful for me. Either I can use it or I can sell it whichever way. That is the point when I start developing it. And that is the point from where I can start capitalizing expenditure. Whatever expenditure has been incurred before that should be expended out immediately. Before this point everything should be expensed immediately. After this point everything should be capitalized. And this point has to be decided by you. That means you have to prove that, okay now on I know that the software or whatever I am making, the intangible asset, it is feasible. Either I am going to use it or I am going to sell it. But feasible means I can make it and I can use it or I can make it and I can sell it. That point onwards you can start capitalizing. If I invested for research purpose for making any software, suppose rupees 10 lakhs. That cannot be treated as capital. No, it cannot be treated as asset. Because this is for the purpose of making software. Sir, it might be purpose of making software. But research phase, research means I am doing trial and error. Trial and error can give you positive results, can give you negative results. Because you are not sure of the positive results you should expense out. But the moment you start developing it you know that it will give positive results. Because you know it will give positive results. Then and then only you start developing it. Hence you should start capitalizing from that point. But I have invested huge amount for this research purpose for making software. Sir, see there are two things again. The research word which is used in general terms. Everything I do is termed as research. That is not the case. When you analyze it from accounting standard point of view, you will come to know that at some point of time that the research phase will actually start developing into a development phase or converting into a development phase. When do you call it a research? The research phase is when you are not sure whether the outcome will be positive or negative. If it is positive. If you know, if you know, if later on it might become positive. Positive. I am doing accounting today. Today. Okay. Say suppose in the same year you come to know that it will be positive and you have not published your accounts as yet. Then you can capitalize those. Once you have published your accounts or once you have made your accounts, you cannot go back and change the expense into capitalize. Right? So the standard says that this research phase has to be expensed out. Development phase has to be capitalized. Sir, in scientific organizations there is a hairline difference. Research are also two types. One is basic research where fundamental research is done and things are, you know, some results are there. Right. So applied research are there. So in those cases where applied research are there, results are known. They are like a case of seed multiplication. I have done the trial and error. I know the result and result is known and then it is seed multiplication. Then it is development in accounting terms. That's what I said. The research word which is used in normal terms or in scientific terms is different from what it is used in accounting terms. In scientific, there is no development. It is always research. Like you said, applied research and research. There are various projects going on in organizations where basic research are also done and applied research are also done. So when you know that this will be the outcome and it will be positive. So I have done my basic research and I am going to extrapolate it or I am going to apply it so that I come out with a product. In that case it is development. And one project can have the component of basic research and applied research. Yes. Why not? Because very difficult to a portion. How much will go under revenue? How much will go under capital? Because same equipments can be used for the research expense and same can be for development or the applied portion also. See, in fact, the standard says that most of the projects will have both the things. Almost all will have both the things. First you always do research, then you start developing it. Right? Yes. You should be able to classify it or you should be able to differentiate that okay now research has ended. I know that now this from here on I have to start developing on my research and I will come out with a product for sure. That phase onwards you can start capitalizing. I invested suppose till that for making any software. And after one year or after two years I made one software. How I will treat this software? You can capitalize all the cost in case of software. Pardon? You can capitalize all those cost in that case. I have already made earlier here. Expenditure already made in earlier here. You started making software. Yes. You took two years to make a software. Yes. Why did you expense out in the first year? You know that you are making a software. The software plan was ready. Software is made by the technical people. Yes. You know you are developing that software. It is not a research. So it might, development might take two years, five years. But you can start capitalizing as soon as you know that it is development. So you can capitalize both two years cost. And then you can, you have to keep it in CWIP. Capital work in progress. Capital work in progress. Once it is completed after two years. Then you can transfer from capital WIP to your fixed as intangible assets. Intangible assets. Yes. When you transfer to intangible assets then you can start amortizing it. Let's go back to the standard again. What is intangible assets? Let's take one by one. Okay. Software in a CD. Is it intangible or tangible? CD is tangible. Software is intangible. But when you have a software in a CD. Is it tangible or intangible? Intangible. Intangible because I am not purchasing a CD. I am purchasing a software. Because I am purchasing a software. The entire product will be classified as intangible asset. It is just transferred in a CD or just conveyed in a CD. What I am buying is intangible. Sir, we are not purchasing a blank CD. I am not intending to purchase a CD. I am intending to purchase a software. Because it is coming in a CD it does not become tangible. It will be classified as intangible. Okay. Software of a printer or scanner. Okay. You know every printer or scanner has a software or has a driver. You need a driver to run a printer or scanner. Or even if I use an optical mouse which is a Wi-Fi mouse. Okay. Which is wireless mouse. I have to use a driver. Which is a software. Now that software is a tangible or intangible. We have not purchased the software. We have not purchased the software. We have purchased the printer. Software is required to run that printer which is the part of printer. Which is integral part of printer. I cannot use that printer or scanner without that software. So that software cost will be added to the cost of printer. And I will capitalize it as a printer. So that is a tangible asset. It is not an intangible asset. Okay. Legal documents. Patents or trademarks. Intangible. So although it is papers, documents. But what it is in effect is an intangible asset. It is a patent. It is giving me a right. It is giving me trademark patents. All these are intangibles. Sir, we have purchased some printer. And it is not a Windows software. Windows are already usable. It is tangible or intangible? Windows software is intangible. Why? Because you have options with software to use. You can use a DOS which is freely available. You can use Windows. You can use various software available in market. But everyone software is compulsory for that software. You have to buy one software. But you can buy any software. Okay. Computer is workable. It is for your need you are buying. It is like suppose I am an engineer. I will buy a CAD software, CAD software. Without that software, I cannot use my computer. It is of no use for me. As an engineer, it is of no use for me. Or as a CA, I have to buy a tally software. Otherwise that computer itself is no use for me. I am buying computer so that I can use tally software. So that does not solve. You have options to purchase. A computer is... You need not need a Microsoft mandatory to run a computer. You have DOS, you have other softwares which you can use. Then that software should be capitalized separately. The computer should be capitalized separately. Nowadays, when you buy a laptop, it comes with operating system. It comes with Windows. Now if they are charging that Windows separately, that software separately, then you should capitalize that software as intangible and laptop as tangible. But if they are charging you a whole amount without giving you a separation, then you should... Sir, in this, actually, we are buying computers preloaded with Windows. Generally, DGS and D-rate contract and other things. The breakup of the operating system may not be... In most of the cases, it may not be available. For MS service, like application software, it may be okay. For operating system, since it is integrated with the computer, in the absence of which, though the options are available, I think it has to be capitalized and the breakup in most of the cases is not available. So, that's what I said. If the breakup is not available, that's what I was coming to, that when you buy a laptop or computer nowadays, it comes along with Windows software. And then you don't have a breakup. If you don't have a breakup, you can capitalize entirely into your computers as fixed assets or tangible assets. Then you need not separate. But if you are buying a software separately, then you have to keep it separate as intangible asset. Now, understand the difference also. Why do you do that? See, when I buy a Windows along with a computer, that means it comes installed in the computer, I cannot take it out and install somewhere else. But whereas, if I am buying a CD separately, suppose this computer is not working today, I installed in this computer Windows, it's not working today. I can use that serial number and I can install in some other computer. So, it's transferable. If it's transferable, I have to capitalize it separately as intangible and computer as tangible. But when it comes along with it, then it has to be capitalized together as computer. Suppose we have the license version for use of the 400 computer. We purchase the computer separately without any operating system. And at the same time, we purchase the license version for the 400 user in the campus. So, this software on which we have spent, let's say, 50 lakhs of rupees, for example, then this 50 lakh software license version, which can be used by any user in the campus, will be tangible or intangible? You try to answer. What will you do in that case? It appears tangible. It will be intangible. Intangible because you're buying software separately. It is transferable. So, today I put in this computer, tomorrow I put in that computer. I can put in any computer I want, any 400 computers of my choice. So, it's an intangible asset. It's a separate asset. Cost will not matter. Cost will not matter. You go for educational versions. No, whatever version, how does version differ? I am talking about principles. How does version differ? Whether it is educational, professional, whatever version it is. If you have bought separately, it has to be capitalized as intangible. No, it's a free version. We'll get under free, free of cost. There is no... If there is no cost, then suppose I capitalize it intangible asset. What will I measure that? Zero, right? You're not buying anything. You're not acquiring anything. Then what? Sir, what is the definition of intangible asset actually? Book definition of intangible asset. Let me see if I have put in my presentation. It says identifiable non-monetary asset without physical substance over which you have control and which gives future economic benefits. See, I'll explain each and everything, but let us first try and do this. Then I'll go to the definition and explain what is identifiable, what is, right? Okay. Internet domain names, intangible asset, will you capitalize it? Can you capitalize it? See, yes, you can capitalize it. It is only just that it costs only 2,000, 3,000 rupees. So you might even expense it out. And secondly, this purchase of domain name is yearly charges, this 2,000, 3,000 rupees. So if it costs you for five years, see, as I said, it has to have a future economic benefit. So I've paid for five years, ten years, then you can capitalize it. If I'm paying for every year, then it's a yearly charges. And hence it does not have a future economic benefit and you have to expense it out. That's how it goes. It's a subscription, it's a yearly subscription kind of thing. So because you pay yearly, you have to expense out. Customer relationships. It is the cost of reputation. Can you capitalize it? You cannot. It is internally generated Goodwill. Internally generated Goodwill can never be capitalized. It's an asset, but I do not have control over it. I cannot, I do not have control over it. I cannot say no. Do I have a five-year agreement with him? If yes, then yes, it's an intangible asset. If I don't have a five-year agreement with him, I don't have control over him. Like an employee, human resource. Can I capitalize my human resource? No. Suppose I installed SAP, SAP, or Tally 9 ERP. Suppose if you understand that, I hope you all will understand SAP also. And then I gave a training on SAP. Okay, training to all my employees. That training itself cost 5 lakh rupees. Can I capitalize that 5 lakh rupees? But actually, if you have bought it in the S5, if you do not, you want it to be RER 3 years. Then it is capitalized. Otherwise it is a expenditure. Yes. If you have put a bond or an agreement with the employee for 5 years, it is not legal to bond an employee for 5 years or something like that. So the logic is I have trained 100 employees for 5 lakh rupees or 50 employees for 5 lakh rupees. But I have no control over them. Tomorrow they might leave. Next employee comes. I have to train them again. I have to incur another expense. Training expense. So training expense can never be capitalized. It is a human resource expense. I do not have control over human resource. I do not have control over customer relationship. No control. No asset. No asset. No intangible asset. Skilled employees, okay. We have just spoken about it. Internally generated goodwill, you can never capitalize. Okay. Website cost. Website development cost. Is it intangible asset? Can we capitalize it? Yes. Website development cost. Can be capitalized as intangible assets because website will go on for 3, 4 years or whatever you assume as. Maybe it will require some development in future or some updation. Maintenance, updation. Those AMC's updations will have to expense out. But the initial cost of creating that website can be capitalized. Okay. Let us go to the definition of intangible asset. Okay. Identifiable non-monetary without physical substance over which you have control and which has future economic benefit. Identifiable. It says identifiable means either it can be separated or it is because of some contractual or legal rights. One of the two. Separated means I can sell it. I can lease it. I can do anything with it. I can separate it from my organization basically. I can separate it from myself. Whether I want to sell it, I want to lease it, I want to give rights to someone to use it or whatever. If that can be done, it is identifiable or it is because of some legal or contractual right that I have acquired it. Again, I can capitalize it as or I can say it is identifiable because I have that legal or contractual document with me. Non-monetary. What is non-monetary? Monetary. Monetary is something which is easily, anytime converted into money terms or which is easily converted into money terms. Give me examples of monetary assets. Investments are monetary assets? Okay, depend on the type of investment. Example? FD, one year FD. FD, yes. FD is monetary. Below one year. Below one year FD. Below one year. Okay, yes. Investment. See FD even if above one year, FD has a nature that you can convert that FD or mature that FD anytime you want and at any time of you want you can calculate suppose I want to mature it today, I want to break it today. Tomorrow, I will know what will be tomorrow's value because interest is fixed. Because of that nature, so fixed or determinable amount is important. If it can be converted into fixed or determinable amount, it is called as monetary. Gold. Gold, no. Gold is not monetary. Why is gold monetary? Gold, every day the rates changed. It is non-monetary. It is non-monetary. It is non-monetary. Okay, okay. I have purchased 100 shares of Tata Motors. Is it monetary or non-monetary? It is. Investment. Sir, shares is an investment. Shares is an investment, of course. So dematerialize, you can sell it online. So? It is monetary. It is non-monetary. The amount is not fixed. The amount cannot be determined. It is non-monetary. What I said, on what, is a question. I have a furniture. I can sell it anytime I want. Is it monetary? No. It is non-monetary. Stock. Stock is monetary? Yes. No. We can sell it. Sir, stock is to foresell. Is it for store for more than one year? No. Stock is inventory. I can sell it anytime I want here, right? Sir, it is monetary. No, it is non-monetary. I do not know the value for sure. But I know the certain amount of money. But I do not know the exact amount. But I know the amount, some amount I can earn. Can you guarantee, can you give me in writing that I will be able to sell it for at least 10 rupees? No, that cannot be. Then, how is it fixed or determinable? If I have a 100 rupees note, I can give you in writing that I can sell it for 100 rupees. Bill is receivable. Bill is receivable? Yes, monetary. Dators. Dators, yes, monetary. You know, in one of the lectures I was saying daters is monetary asset. Someone said daters to insan hote. Daters is monetary asset. It is receivable. Accounts is receivable. Daters means accounts is receivable. It is monetary asset. In monetary asset, you know, there is one more very important feature. That feature is that if my monetary asset is there, then somebody's monetary liability will be there. If my monetary asset is there, then somebody's monetary liability will be there. It is a feature. You calculate this and you will get answers. This monetary assets are interchangeable. Monetary assets can be changed into non-monetary, non-monetary can be changed to monetary. Yes, I have cash. I will go and purchase fixed asset. It is changed to non-monetary. I have fixed asset. I sell it. I have cash. It is monetary. Impact remains same on the balance sheet. Impact remains same on balance sheet. Impact remains same on balance sheet. But I am trying to explain to you what is monetary, what is non-monetary. It is also important from AS11 point of view. If you have any outstanding monetary liability or asset in foreign exchange, then you have to convert using the closing rate as on 31st March. See, you are logically, you are right, but the problem here is the problem started because every day the rupee value started changing and changing in huge variations. See, ideally because of nature, cash is cash. Whether cash is denominated in any currency, cash is cash. So, a ten dollar might have a different value in rupee terms. But ten dollar will have same value in dollar terms. In terms of rupee, it is not a cash, it is not monetary. But it may be in terms of dollar, it is monetary. So, that is what I am saying. You are logically right, but theoretically or in books or in accounting terms it will be monetary. This is the only, I can say, exception because of the changing values because the money has been made, rupee has been made directly proportioned, it has been linked to USD value. Because of that, the value changes. Deter is monetary asset. Deter is monetary asset. It is monetary asset because I know that today I will be getting that 100 rupees or 10 rupees from the debtor. Later on it may be... No, guarantee, no. It can be bad. Sir, guarantee, no. Actually, there is no guarantee. I have read 10 lakh rupees in my locker. If there is a fire tomorrow, then there is no guarantee. But data is monetary asset. It can be converted into fixed or determinable amount of payment, amount of cash. Okay. Can we go back, sir, to skilled employees and... Sorry? Can we go back to skilled employees? You said you have no control. Yes, skilled employees, yes. You said you have no control and patent. Right. Skilled employees is not an intangible asset which you can capitalize. Patent is an intangible asset which you can capitalize. Research invention. The researcher must have used the infrastructure of the institution. Right. So it is not his individual property. Right. So patent will be the property of the institution. Is that it? So when he retires now, what happens? Will it... There has to be a... Okay. I will answer your question. See, the patent is in the name of the institution? It has to be because he must have used the infrastructure of the institution. Right. So what happens is when he starts using the infrastructure of the institution or institution starts incurring cost of the infrastructure, it has to first define whether it's a research phase or it's a development phase. Okay. Development phase, how do you determine when it is registered for patent? No, see patent actually can be registered even midway. So I know that okay, I can develop this. I will register a initial, there is an initial patent registration and there is a final patent registration. So yes, patent can be considered as a midway thing. A development phase can start before patent registration. It can start after or it can start from. So patent registration has nothing to do with development phase. Development phase starts when I know that okay, this is the structure or this is the roadmap. If I follow, I will be able to reach a final destination and I will be able to confirmly develop a product which I can sell or use. That is the point onwards. I can start capitalizing all the cost incurred. Now that cost includes whatever I pay to my employees, whatever I pay to the electricity for water or for any infrastructure or any facilities or any cost I've incurred from the development phase I can start capitalizing. So the cost has to be looked back only from the development phase. Yes. Okay. So I said identifiable non-monetary without physical substance, intangible assets has to be without physical substance. Control I defined, control means I can use as I want for whatever I want. That is a control. Okay. Future economic benefit, economic benefit can be revenue generation, can be cost saving. Any benefit, any economic benefit in any manner is future economic benefit. For a future period, future period means next period. Okay. You have to recognize intangible asset at cost. Okay. Cost means purchase price and any directly attributable cost or implementation cost which includes as I said employee cost, employee benefits, professional fees, any testing charges, any rent or any depreciation of the instruments that you use. All those can be capitalized as development cost or part of that intangible asset. Okay. I was saying internally generated has to be distributed into two phase, research phase and development phase. Research phase, they have said that these are basically ideas. These are not rules. Okay. These are examples which they have used. Research phase will include obtaining new knowledge, research findings. You search for alternative solutions and then you do a technical feasibility. Once that technical feasibility is established, you start with development phase. Development phase means your intention to complete and use or sell. You have the ability to use or sell which will give you future economic benefits and you can reliably measure the same. You have to amortize intangible assets over useful life. There is a rebuttable presumption that useful life cannot exceed 10 years. Okay. Rebuttable presumption means if you can prove this presumption wrong, then you can have a higher useful life. Otherwise, maximum useful life you can have is 10 years. You can use same similar to AS10, SLM or WDV method. Okay. For intangible asset, you have to assume that residual value will be 0. Unless there is a commitment by a third party that they will purchase that intangible asset, or there is an active market for that intangible asset. Any queries on intangible assets? Sir, you said that patent has to be capitalized at cost. Yes. So the cost may be the research cost. Plus when we file a patent, it has to go to... Patent registration. Patent registration has to go to various stages. Right. Whether it reaches the final destination or not, that's a different story. Right. But if you get a patent, the value that it gives to the organization is not just the research cost and the patent filing cost. You can generate a whole lot of revenue because of the royalty that it commands and so on. So I really don't think that it should be... If you just capitalized at cost, it's not a fair value. Patent registration cost also you can capitalize. Whatever you pay to the person who is developing that product or that research, development of that research phase, that also you can capitalize. So all your cost after development, whatever you pay, whatever you incur, can be capitalized as part of that patent or that intangible asset. Okay. Now why do we do at cost? Can we do a revaluation of intangible asset like we do for fixed asset? We can do revaluation for fixed asset, right? Can we do revaluation for intangible asset? You don't have a active market, you cannot sell it. How will you do it? You don't have a market value for that. Even though the... At that time, I can change the money. You are talking about in my books or your books? My books. Your books? Yes. You are giving right to use the patent to someone else, you are leasing out the patents. But it may have a different value at different time. Patents as an intangible asset is to be capitalized only at cost and has to be kept at cost minus amortization value. That is all right. But after a few years, suppose after five years it may have a very high value or otherwise it may have a, may be very lesser value than that. See. You still have to carry it at cost minus amortized value. That may not give the correct picture in fact because suppose it is having very less value and we capitalized it up before five years. Okay. What do you do with the value? You sell it? You give a right to use to someone? Of course. And you earn it? Right. What do you get? When you get that money, when you earn it, where do you take it? Income. Right. And what do you take to expense? Amortization of this intangible asset. So you are using that intangible asset to earn that money. Right. So you are getting that income. You are getting amortization of that intangible asset to your expenditure account. That's how you do accounting. Will there be any depreciation on it? Yes. Amortization. The word is amortization. It's same as depreciation. Intangible assets will have to be depreciated over 10 years. And when you depreciate it, you use it for, there's a future economic benefit. So you generate income out of it. That income will be taken to income account. In the educational sector, the scientists do various types of research. Right. He has done, say, three different types of research. And finally he says that, okay, I have a patent for it. And he applies for a patent. Right. Where do we identify the cost? Is his research complete when he applies for patent? Say, for example, it is complete. But he has done, say, three, four phases of research. And finally he says, okay, I've got a patent now and I want to apply for a patent. And then he starts... And he applies the registration cost is okay. But... And then he starts developing that research? You start developing the product? See, he has developed to a stage where he is applying for a patent. He says, this is my patent now. Now this is a result of over the years, a complete series of researches. Right. So how do you identify the cost? It is only him that who can say that, okay, from now on, I know that, say, out of three, four alternatives or three, four researches, I know that I can... This research is something which I can develop on. And he starts doing a advanced research or advanced thing on that research. That's the point when he should say that, okay, now you can start capitalizing these costs. See, it is a subjective thing. You have to only prove it by way of papers that, yes, this research can convert into something material from here on. So till that point, everything will be expense. From this point onwards, everything will be capitalized. And somewhere down the line, you will apply for patent. Even after applying for patent, maybe six months or one year, you will need further development of that product. The second aspect of my question is, if the patent is registered in the name of the institution, but it is the patent of a particular scientist, once he retires, how does it have an impact on our balance sheet? Once he retires, okay. Do we still have that right of that patent and can we still get any benefits out of it in future? That is dependent on the IPR rights. So if you have that IPR rights, if you have that right to use it in future and to generate future economic benefit in future, then you can still hold that as intangible asset. Otherwise, you have to amortize it or finish it off or you call it as impairment because now the right has gone. Any other question on intangible assets? I think, yes, it will be an impairment of asset. So once the researcher leaves the service, retires, that invention cannot be operated by any other. So it will be an impairment. Then you will have to impair. Yes. So basically, see there are two things. One, if you can estimate how many years you can use the research or how many years before which he will not retire and that is not exceeding 10 years, then you can easily amortize over 10 years. Okay. If he retires in the sixth year, then yes. Then remaining four years, you have to treat it as impairment and charge it to your expenditure account. Or if you retire, if you are spreading over 10 years and he retires after 10 years, then anyways your intangible asset has become zero. Then there is no need of impairment. Okay, let's have a tea break.