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Hi All,
Can someone please help me with IAS38. My organization is generating an intangible asset (software), the organization is divided into two parts, service entities and business entities. service entities are responsible for providing services to whole group and currently responsible for developing an intangible assets. The service entity charges (intercompany invoice) to Holding for the cost incurred, in next step the Holding recharge (IC) to subsidiary (beneficiary of the software) and this subsidiary is capitalizing the development cost .
Firstly, is it correct treatment for the subsidiary to capitalize the development cost ? or it should be capitalized in Holding?
Secondly, What if Holding gets the IP registration for the software and keep on issuing the intercompany invoice to subs for cost incurring in the development phase?
Finally, what would be the IFRS treatment when the intangible assets is completed and ready to use ? who can be able to recognize the intangible assets Holding or Sub?

Please shed some light on it.

Thanks

when holding recharges to sub, is that for the use of the software, or to transfer development costs incurred?

thank for reply

transfer of development costs incurred.

thanks

Who is going to control the software once completed? Will the holding control it and let subs use it? Or will the subs obtain the control over separate copies of the software?

What would be the outcome in both scenarios

what if Holding will control it and let the subs use it
or
Sub controls and use it

Thanks

from your answer to my question is sounds like the sub owns the costs and so the sub would register the IP over it too

as it all happens within a group, you would probably need to book some consolidation adjustments as not all development costs will be eligible for capitalisation in consolidated accounts as per this guidance:
https://ifrscommunity.com/knowledge-bas ... ble-assets

If the subs obtain the control over separate copies, it sounds reasonable for the subs to recognize the expenditures as Software under development. In this case, the holding is deemed acting as an agent.

If the holding controls the software and lets the subs use it, the subs' payments to the holding look to me like the prepayments for the future services from the subs' standpoint. But I'm not fully sure.

This AD might be relevant: https://www.ifrs.org/content/dam/ifrs/s ... mar-21.pdf

I woulld agree with pub_acco´s point of wiew. It is important to know who is the owner of the IP. Does the holding company owns and controll the software and it is basically sub-licensing it or will the sub own the IP and control the software.