(a) During the Year 2009 10, Pragati Ltd. starts developing a new production process. During the year, expenditure incurred was Rs.20 lakhs, of which Rs.18 lakhs was incurred before 1st March, 2010 and 2 lakhs was incurred between 1st March, 2010 and 31st March, 2010. The company demonstrated that on 1st March, 2010 the production process met the criteria for recognition as an intangible asset. The recoverable amount of the know how embodied in the process (including future cash outflows to complete the process before it was available for use) was estimated to be 10 lakhs.
(i) What is the value of the intangible asset as on 31st March, 2010?
(ii) What amount will be treated as an expense?
(b) Continuing the problem mentioned in part (a) above, suppose during the year ended 31st March, 2011 additional expenditure incurred on the new production process was Rs.40 lakhs. On 31st March, 2011 the recoverable amount of the know how embodied in the process (including future cash outflows to complete the process before it was available for use) was estimated to be Rs.38 lakhs.
(i) What is the total cost of the production process on 31st March, 2011?
(ii) What is the impairment loss?
(iii) When can impairment loss be reversed in a subsequent period?