IAS 38 Intangible Assets

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Muzaffar
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Joined: 31 May 2021, 10:05

IAS 38 Intangible Assets

Post by Muzaffar »

Hello IFRS community,

We are generating a software for use and income generation from its use. The Software has many different components and will take more than 3-5 years for completion. Currently I am charging all the directly attributable costs to Development costs. My Questions is that what criteria will be used to capitalize the development cost as an asset and to start amortizing it. For example, do I need to capitalize the cost of each component when it is completed or I will capitalize the asset once and for all when is is available 100%. Need guidance Please.
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Marek Muc
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Re: IAS 38 Intangible Assets

Post by Marek Muc »

hi, the guidance is in our knowledge base:
https://ifrscommunity.com/knowledge-bas ... ble-assets

you need to capitalise eligible expenditures once they are incurred, you cannot charge them to P&L and then 'recycle' them back to the carrying amount of the asset
Muzaffar
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Joined: 31 May 2021, 10:05

Re: IAS 38 Intangible Assets

Post by Muzaffar »

Hi Marek,

Thank you for the reply. I understand that I need to book all eligible expenditure to development cost (CWIP). The question here is that when will I book the Development Cost (CWIP) to Development Cost asset and when will amortization start. As in the previous year the software was not complete so all eligible expenditure were added as development cost (CWIP). This year one component of the software is complete and has started generating its revenue. How much cost out of CWIP to be capitalized and on which basis (%age of completion etc.).
JRSB
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Re: IAS 38 Intangible Assets

Post by JRSB »

Split it into separate intangible assets then, sounds as though they'll generate distinct cash flows
Muzaffar
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Joined: 31 May 2021, 10:05

Re: IAS 38 Intangible Assets

Post by Muzaffar »

Yes, there are two different cashflows which will be generated from them.

one more thing which remains to be addressed here is that if the software is not complete during the year it will remain in development cost (CWIP) and once it is ready to generate income then it will be added in to Intangible assets and starts amortization?
JRSB
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Re: IAS 38 Intangible Assets

Post by JRSB »

Amortisation shall begin when the asset is available for use, ie when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.
Leo
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Re: IAS 38 Intangible Assets

Post by Leo »

And until then, all the related costs should be capitalized as Intangible assets, subject to impairment test at each closing.
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