SIC-32 - website development outsourced

[xuerebx]

Hi all.

SIC-32 applies to website development - in most instances internal development costs on websites are expensed. It's not clear however (to me) whether if outsourced (i.e. external) development costs, where an entity pays a third party to develop the content of its website, also falls within scope of SIC-32. Generally, separate acquisitions of intangible assets are recognised as such as the probability criterion (of the expected future economic benefits) is assumed to be met and so the 6 PIRATE criteria one needs to meet capitalise such costs if such costs were incurred internally are not relevant in these instances.

Any ideas - does SIC-32 still apply if you pay someone else to develop the website for you? SIC-32 states that "An entity may incur internal expenditure on the development and operation of its own web site for internal or external access.", so there's that, but maybe the application shouldn't be so narrow-scope in mind.

Thanks!

[JRSB]

I think SIC32 just serves as a clarification of how IAS 38 applies, so all the same good stuff applies like in SIC32 para 8 as to how you'll demonstrate economic benefits, etc, whether internally capitalised or purchased..

[xuerebx]

I think SIC32 just serves as a clarification of how IAS 38 applies, so all the same good stuff applies like in SIC32 para 8 as to how you'll demonstrate economic benefits, etc, whether internally capitalised or purchased..

So the PIRATE criteria should still appy then, whether internally developed or purchased separately (outsourced)? I looked at the Big 4 guidance books and although they don't spell it out, one of them states "This [development cost criteria] applies equally to internal and external costs".

[JRSB]

TO me it's still an 'internally generated' intangible even if you used outsourced support, eg you didn't buy the asset, you constructed/developed it.

[xuerebx]

That's true I suppose! Thanks for your feedback

[Marek Muc]

I agree with JRSB

[xuerebx]

Thanks Marek!