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SIC 32 concludes that a website developed by an enterprise using internal expenditure, whether for internal or external access, is an internally generated intangible asset that is subject to the requirements of IAS 38, Intangible Assets.
SIC 32 identifies the following stages of website development:
- Planning
- Application and infrastructure development
- Content development
- Operating
SIC 32 addresses the appropriate accounting treatment for internal expenditure on each of those stages of development and operation:
(a) A website arising from development should be recognised as an intangible asset if, and only if, in addition to complying with the general requirements described in IAS 38.19 for recognition and initial measurement, an enterprise can satisfy the requirements in IAS 38.45. In particular, an enterprise may be able to satisfy the requirement to demonstrate how its website will generate probable future economic benefits under IAS 38.45(d) when, for example, the website is capable of generating revenues, including direct revenues from enabling orders to be placed. An enterprise is not able to demonstrate how a website developed solely or primarily for promoting and advertising its own products and services will generate probable future economic benefits, and consequently all expenditure on developing such a website should be recognised as an expense when incurred.
(b) Any internal expenditure on the development and operation of an enterprise's own website should be accounted for in accordance with IAS 38. The nature of each activity for which expenditure is incurred (eg training employees and maintaining the website) and the website's stage of development or post-development should be evaluated to determine the appropriate accounting treatment. For example:
- Planning. The Planning stage is similar in nature to the research phase in IAS 38.42-.44. Expenditure incurred in this stage should be recognised as an expense when it is incurred.
- Application and Infrastructure Development. The Application and Infrastructure Development stage, the Graphical Design stage and the Content Development stage, to the extent that content is developed for purposes other than to advertise and promote an enterprise's own products and services, are similar in nature to the development phase in IAS 38.45-.52. Expenditure incurred in these stages should be included in the cost of a website recognised as an intangible asset in accordance with this Interpretation when the expenditure can be directly attributed, or allocated on a reasonable and consistent basis, to preparing the website for its intended use. For example, expenditure on purchasing or creating content (other than content that advertises and promotes an enterprise's own products and services) specifically for a website, or expenditure to enable use of the content (such as a fee for acquiring a licence to reproduce) on the website, should be included in the cost of development when this condition is met. However, in accordance with IAS 38.59, expenditure on an intangible item that was initially recognised as an expense in previous financial statements should not be recognised as part of the cost of an intangible asset at a later date (for instance, when the costs of a copyright have been fully amortised, and the content is subsequently provided on a website).
- Content Development. Expenditure incurred in the Content Development stage, to the extent that content is developed to advertise and promote an enterprise's own products and services (such as digital photographs of products) should be recognised as an expense when incurred in accordance with IAS 38.57(c). For example, when accounting for expenditure on professional services for taking digital photographs of an enterprise's own products and for enhancing their display, expenditure should be recognised as an expense as the professional services are received during the process, not when the digital photographs are displayed on the website.
- Operating. The Operating stage begins once development of a website is complete. Expenditure incurred in this stage should be recognised as an expense when it is incurred unless it meets the criteria in IAS 38.60.
(c) A website that is recognised as an intangible asset under SIC 32 should be measured after initial recognition by applying the requirements of IAS 38.63-.78. The best estimate of a website's useful life should be short.
What else can I help you with?
What is the required accounting treatment for research and development costs?
Research and development (R&D) costs are generally treated as expenses in the period they are incurred according to accounting standards like GAAP and IFRS. This means that companies must recognize R&D costs on the income statement as they arise, rather than capitalizing them as assets. However, certain costs related to development phases may be capitalized if they meet specific criteria, such as demonstrating technical feasibility and future economic benefits. Overall, the primary treatment is to expense R&D costs to reflect their nature as investments in future innovation.
Which of the following statements is not true with regard to international accounting standards for research and development costs?
Some countries require research costs to be expensed and development costs to be capitalized
How software development is treated in balance sheet?
In a balance sheet, software development costs are typically classified as intangible assets if they meet certain criteria, such as being identifiable and providing future economic benefits. Costs incurred during the development phase can be capitalized, while expenses related to research and preliminary stages are usually expensed as incurred. Once capitalized, these costs are amortized over their useful life. Proper classification and treatment depend on accounting standards like GAAP or IFRS.
Successful-efforts method of accounting?
This is an accounting method used by the Oil and Gas industry. Specifically, it is a method in which the company capitalizes costs associated with exploration to successfully locate reserves and expenses costs associated exploration that does not result in the discovery of reserves. Opposite to successful-efforts is Full Costing method in which all costs associated with exploration and development are capitalized whether any reserves are found our not.
Are organizational costs an intangible asset?
Organizational costs are generally considered intangible assets, as they represent the expenses incurred during the formation of a company, such as legal fees and registration costs. However, they are often expensed in the period they are incurred rather than capitalized on the balance sheet, depending on accounting standards. Therefore, while they may have intangible value, their treatment varies under different accounting frameworks.
What is the accounting treatment for IPO costs?
The accounting treatment for transaction costs are as deductible for equity range. Since the IPO is defined as the first issuance of equity. Accounting also treats transactions of cost for IPO as a merger accounting method.
What is the required accounting treatment for research and development costs?
Research and development (R&D) costs are generally treated as expenses in the period they are incurred according to accounting standards like GAAP and IFRS. This means that companies must recognize R&D costs on the income statement as they arise, rather than capitalizing them as assets. However, certain costs related to development phases may be capitalized if they meet specific criteria, such as demonstrating technical feasibility and future economic benefits. Overall, the primary treatment is to expense R&D costs to reflect their nature as investments in future innovation.
Which of the following statements is not true with regard to international accounting standards for research and development costs?
Some countries require research costs to be expensed and development costs to be capitalized
How software development is treated in balance sheet?
In a balance sheet, software development costs are typically classified as intangible assets if they meet certain criteria, such as being identifiable and providing future economic benefits. Costs incurred during the development phase can be capitalized, while expenses related to research and preliminary stages are usually expensed as incurred. Once capitalized, these costs are amortized over their useful life. Proper classification and treatment depend on accounting standards like GAAP or IFRS.
How should Research and Development costs be accounted for?
Research and Development (R&D) costs should be accounted for according to the relevant accounting standards, typically under the guidelines of IFRS or GAAP. Generally, these costs are expensed as incurred, reflecting the uncertainty of future benefits. However, development costs may be capitalized if specific criteria are met, such as technical feasibility and intention to complete the project for use or sale. Companies should consistently apply their chosen accounting policy and disclose it in their financial statements.
What are the stages of accounting for costs?
direct costs,indirect costs,sunk costs, Activity based costing.
Are donors responsible for the costs of the treatment?
No the recipient is responsible for treatment costs.
What is the difference between an economic cost and accounting cost?
Economic costs look refers to a combination of accounting costs(Explicit costs),Implicit costs and opportunity costs. Accounting costs only considers financial and costs incurred or agreed to be payed in order to produce a good or a service.
What is the cost accounting in service organization?
Accounting that categorizes costs at different job units
Successful-efforts method of accounting?
This is an accounting method used by the Oil and Gas industry. Specifically, it is a method in which the company capitalizes costs associated with exploration to successfully locate reserves and expenses costs associated exploration that does not result in the discovery of reserves. Opposite to successful-efforts is Full Costing method in which all costs associated with exploration and development are capitalized whether any reserves are found our not.
What is the effect of current technology in managerial accounting?
Reduction of reporting costs of managerial accounting information
Accounting profits are typically?
greater then economic profits,as accounting profits do not include implicit costs
