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📚 Learn/ Paper 1 — Advanced Accounting/ Indian Accounting Standards (AS 1–29)
Microlesson · 5-min read

AS 26 – Definition and Identifiability of Intangible Assets

## AS 26 – Definition of Intangible Asset

An intangible asset is an asset that is:

  • Identifiable
  • Non-monetary
  • Without physical substance
  • Held for use (not for sale in ordinary course of business)

> Assets held for sale in ordinary course → AS 2 (Inventory), not AS 26.

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### Identifiability — Any ONE condition must be met

ConditionExplanation
1. Separately saleableCan be sold, transferred, or licensed separately from other assets
2. Arises from legal contractStems from contractual or other legal rights

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### Monetary vs Non-Monetary Assets

TypeExamplesKey Feature
MonetaryCash, Debtors, LoansRealisable in a fixed or determinable amount
Non-MonetaryIntangible AssetsValue NOT fixed — benefit can vary

> AS 11 (Foreign Exchange) defines non-monetary assets — intangible assets fall here.

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### Assets with Both Tangible and Intangible Elements

Assess which element is more significant:

  • Software purchased on a CD (standalone) → AS 26 (intangible element dominant)
  • Computer machine with embedded operating software → AS 10 PPE (tangible element dominant)

Worked example

### Example 1

Software purchased separately on CD: The software is the primary asset; physical CD is incidental. Classify under AS 26 as an intangible asset.

### Example 2

Computer machine purchased with built-in software: The machine (tangible element) is the primary asset. Classify under AS 10 as PPE. The software is incidental to the hardware.

⚠️ Common exam mistakes

  • Assuming BOTH identifiability conditions must be met — only ONE is required.
  • Classifying bundled hardware+software always as intangible — when the tangible element dominates, use AS 10 PPE.
  • Confusing monetary and non-monetary assets: debtors are monetary (fixed amount receivable); intangibles are non-monetary (future benefit is variable).
  • Including assets held for sale in ordinary course under AS 26 — those are inventories under AS 2.
Bare-Act text Paragraph 7 – Definitions · AS 26 – Intangible Assets · click to expand
An intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.
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