Intangible assets

[wsafca]

A company has some software recognized as 'Intangible'.

The software is the source of income, and generating almost 30 to 40 % of the total income.

Up-gradtion to enhance its capacity and feature addition is in process as well.

Whether the professional charges asociated with it can be capitalized?

Regards

Ahmed

[hmmm]

if it is regular nature then it should be expensed out.
otherwise if it enhance it efficiency and non regular nature then should be capitalized

[hshamsi]

@ wsafca

the sol provided by hmmm is correct, if the professional charges are of non-recurring nature (occurring once only with the enhancement and up-gradation of the intangible) it should be capitalized alongwith the up-gradation charges if it actually enhances its capacity, features and/or useful life with the cost of intangible and amortized over its remaining/revised useful life of intangible or 10 years which ever is less.

regards.

[awaisaftab]

If any services which are rendered in relation to maintenace of software and for proper working then the costs related to them will be expense out but any improvement which made to enhance the capability of a software then it will be capitalized for instance preparation of an additional module in a software. The additional cost which will be capitalized will also be amortized as the additons in fixed assets are depreciated.

[wsafca]

In para 31 of IAS 38, there is a reference to 'incidental expenditures'; What does it refer to?

Also please consider para 63, refered by para 20 of the same IAS.

Regards

Ahmed

[kamranACA]

Dear

Can you please let us know

-what new "features" you are supposed to add on?

-what "upgradation" meant for. Is it something inevtitable without which revenue cannot be earned or is simply to simplify or line up the procedures further?

-will there be an increase in revenue generation after such upgradation?

-will there be an increase in useful life (if the asset does not have indefinite life)?

The answer to these questions will decide what should be advised.

Regards,



KAMRAN.

[wsafca]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by kamranACA</i>
<br />Dear

Can you please let us know

-what new "features" you are supposed to add on?

-what "upgradation" meant for. Is it something inevtitable without which revenue cannot be earned or is simply to simplify or line up the procedures further?

-will there be an increase in revenue generation after such upgradation?

-will there be an increase in useful life (if the asset does not have indefinite life)?

The answer to these questions will decide what should be advised.

Regards,



KAMRAN.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

New features will increase its earning capacity definitly, as it will allow the company to icrease the area/range of the services; but as I already mentioned it is already generating reasonable amount of revenue.

Actually the nature of such intangible assets (softwares)is such that enhancement and feature addition never stops. (if we see a paralell tangible, it is just like we manufactured a printer, then added a photocopy feature, and then scanning, then we add some characteristics to ease all these operations so on and so forth.

Nothing to do with useful life.

Regards

Ahmed

[maani]

hi everybuddy,

quoting a real example of a listed company, it may make the things clear....

Oracle 11i was implemented in the organization....in current year they upgrade their ERP from Oracle 11i to Oracle 12R....for this purpose they paid licence fee to Oracle Corporation....this licence fee along with all the "data migration costs" were capitalized....data migration costs includes professional services rendered by external ERP consultants and the organization's own IT staff salaries related to the whole activity....This is the case where the ERP's version is upgraded....

Further if a new module is added to the same software, costs relating to that should also be capitalized....for example, if the software has 3 modules i.e. Fixed Assets Module, Accounts Payable Module, Accounts Receivable Module and the Cash Module....Now if the organization wants to implement Inventory Module (not previously included in the package), costs relating to it will also be capitalized....

plz tell me whether it solves your query or not....

Regards.

[wsafca]

Thanks manni

I reached .....

[kamranACA]

wsafca

It appears that the costs incurred in your case should be expensed out. I agree with what Maani has quoted as an example. However, your case appears to be bit different.

Regards,


KAMRAN.