Case Study 1 summarizes a transaction where R Ltd acquires a patent right from K Ltd in exchange for a mineral right valued at Rs. 500 lacs. It asks how this transaction should be measured and accounted for in the books of R Ltd and K Ltd. Case Study 2 involves Sita Ltd purchasing a patent for Rs. 100 lacs with plans to resell it after 5 years. It asks how the patent should be initially recognized, whether amortization is required under the revaluation model, what the useful life and first year amortization should be, and how to account for an increase in fair value after 1 year. Case Study 3 describes expenditures by Ramanuja Ltd to develop a production process

1. Case Study 1
A patent right is acquired by R Ltd from K Ltd in exchange of
mineral right. The mineral right is carried at Rs. 500 lacs in
the book of R Ltd.
How should this transaction be measured and accounted for
by R Ltd and K Ltd.? In K Ltd.’s books the patent is carried
at Rs. 10 lac which is not the fair market value.
Case Study 2
Sita Ltd purchased a Patent Right for Rs. 100 lacs. It has
been assessed that the useful life However, another Group
company intends to buy the patent after 5 years for 60% of
the purchase price. Sita Ltd also intends to sell it after 5
years.
There exists active market for similar patent. Sita Ltd wishes
to adopt revaluation model. It has observed that fair market
value of the patent at the end of Year 1 is Rs. 50 lacs.
Suppose the use value of the asset under IAS 36 is Rs. 56
lacs.
i. At what cost should Sita Ltd recognize the patent
initially?
ii. If the entity adopts revaluation model, does it need
to adopt an amortization policy?
iii. If the answer to question (ii) is affirmative, what
should be the useful life of the asset?
iv. What should be the amortization for Year 1?
v. How should the Sita Ltd account for the fair value at
the end of Year 1?

2. Case Study 3
Ramanuja Ltd is developing production process. During
2007, expenditure incurred was Rs.100 million, of which Rs.
70 million was incurred before 1 December 2007 and
balance Rs.30 million was incurred between 1 December
2007 and 31 December 2007.
The company demonstrated on 1 December 2007 that the
production process met the criteria for recognition as an
intangible asset in accordance with Para 57, IAS 38.
The recoverable amount of know-how embodied in the
process ( including future cash flows to complete the process
before it is available for use) is estimated at Rs. 34 million.
During 2008, Ramanuja Ltd incurred further expenditure of
Rs.50 million. At the end of 2008, the recoverable amount of
know-how embodied in the process ( including future cash
flows to complete the process before it is available for use)
is estimated at Rs.70 million.
1. What should be recognized as Intangible Asset?
2. How much should be expensed off?
3. What is the impairment Loss?