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+--- Thread: cost of renewal (/thread-cost-of-renewal)
cost of renewal - ahsan_aziz_arain - 07-12-2009
1). salam , dears , plz tell me about the accounting treatment of cost of renewal of an intengible asset (licence ,etc) , when it is significant and when it is insignificant?
2). when cost associated with the renewal of a licence is insignificant , should it be expensed or capitalised (added in the carrying amount of the intangible) ?
- Odyssee - 07-14-2009
My guess is that the cost of renewal of an intangible asset is a subsequent expenditure and it should be treated accordingly.
Subsequent expenditure on an intangible asset after its purchase or completion should be recognised as an expense when it is incurred, unless it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance and the expenditure can be measured and attributed to the asset reliably. [IAS 38.60]
- ahsan_aziz_arain - 07-16-2009
not satisfied
- Odyssee - 07-16-2009
As far as the question of significant or insignificant is concerned...IFRS does not prescribe a thumb rule for that...and in that case professional judgement needs to be applied in every situation... Some amounts might be significant for a small company and insignificant for a large company.
My view, according to the limited knowledge i have, is that when the cost of renewal is insignificant, it should be expensed.
- ahsan_aziz_arain - 07-20-2009
ok . thanks alot