IAS38 - Intangible assets

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dbates23
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Joined: 29 Jun 2022, 22:53

IAS38 - Intangible assets

Post by dbates23 »

Evening,

Please be gentle with me as this is my first post to the forum and I'm not an accountant.

I work in the IT department for a UK non departmental public body (arms length from government) and we are towards the end of an external audit. We are currently developing a new internal IT system using the agile development methodology meaning the system is incrementally improved until it meets the initial business requirements.
Now our internal position on this is that we can't amortise this software as we still consider it an Asset Under Construction and only when the initial requirements have been delivered will it move to an Asset in Use and amortised. Looking at IAS38, the guidance is very open to interpretation and we feel that we have interpreted it in a sensible way however, the auditors do not agree.
What is the opinion on this forum and what have people done in practice of when to start the amortisation of software developed using the agile methodology.

Apologies for my clumsy question and thank you in advance for any advice you may be able to provide.

Regards,

Dave
DJP
Trusted Expert
Posts: 185
Joined: 26 Jun 2020, 15:57

Re: IAS38 - Intangible assets

Post by DJP »

Good morning,

A couple of questions:

1) When you say that the auditors do not agree, do you mean that they do not agree with capitalising these costs at all or with the fact that you have not yet started amortising the asset?

2) What is the real status of the project? Even though you have it classified as "asset under construction", are you already using it in any way?

Kind regards
JRSB
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Posts: 868
Joined: 01 Mar 2020, 01:10
Location: UK

Re: IAS38 - Intangible assets

Post by JRSB »

yes agree with q2 - an incremental system suggests that it is being improved as it goes along over time, which implies it's being used in the QUANGO rather than just collecting dust until it's perfect to deploy? These systems are normally implemented in order to collect feedback etc no?
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