## Subsequent Costs Incurred on an Intangible Asset

Condition	Treatment
Expenditure will generate Future Economic Benefits (FEB)	Capitalise — add to cost of intangible asset
Expenditure will NOT generate FEB	Expense to P&L

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### Examples

Scenario	Treatment
Software engineer fees — software still hanging/crashing	P&L (maintenance, no new FEB)
Software upgrade fees — validity/capability increased	Capitalise (generates additional FEB)

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## Expenditure ALWAYS Recognised as Expense — Never Capitalised

Even if they seem to create value, the following are always charged to P&L:

1. Training expenses

2. Advertising and publicity expenses

3. Startup / pre-incorporation expenses

4. Relocation or reorganisation expenses

5. Research phase expenses

> These create no identifiable intangible asset that the entity controls, so they cannot meet the recognition criteria.

⚠️ Common exam mistakes

Capitalising advertising expenditure thinking it builds brand value — AS 26 specifically prohibits this; always expense.
Capitalising training costs as 'human capital' — no intangible asset can be recognised for training; always P&L.
Capitalising startup and pre-incorporation expenses — these are always P&L regardless of expected future benefits.
Not distinguishing between maintenance (P&L) and enhancement (capitalise) for subsequent software costs.

Bare-Act text Paragraph 57 – Subsequent Expenditure · AS 26 – Intangible Assets · click to expand

Expenditure on an intangible item should be recognised as an expense when it is incurred unless: (a) it forms part of the cost of an intangible asset that meets the recognition criteria; or (b) the item is acquired in a business combination and cannot be recognised as an intangible asset, in which case it forms part of the amount attributed to goodwill at the date of acquisition.

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AS 26 – Subsequent Costs and Expenditure Always Recognised as Expense

Worked example

⚠️ Common exam mistakes