13 January 2011
Firstly to capitalise as an intangible asset you need to prove that it will result in future economic benefits flowing to the enterprise say how it will reduce costs or increase revenues. Say a travel agent / hotel/ car rental or a mobile phone company can show that their sales will go up or recharge commissions will come down
Otherwise if it is just for advertising purposes then it cannot be capitalised and the costs have to be expensed. In case a company cannot prove that the expenditure will give rise to economic benefits in future, it needs to write them off.
IFRS contains a literature SIC 32 - that specifically deals with these costs. It identifies various phases of website development and the treatment of those costs.
CAclubindia
