Treatment of ERP expenses

This query is : Open

Ashok (Querist)
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23 November 2009 Expenses incurred on implementing ERP, what treatment is to be given? For this purpose following expenses are incurred.

Computer Hardware (servers etc.)
Computer software (payment of licence fees etc.)
Professional fees (payment to implementing agency)

How these expenses are to be treated in books of accounts, whether to claim as revene expenses or capitalise and claim depreciation.

If to be capitalised, please specify rate of depreciation both under cos act and income tax act.

Thanks,

CA. Rishabh Mittal

CA. Rishabh Mittal (Expert)
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23 November 2009 As per AS 26, cost of acquired software for internal use should be capitalized as an intangible asset if it meets the recognition criteria. i.e.
1. Characterstics of an asset.
2. Future Economic Benefits accruuing to enterprise
3. Cost reliably measurable.

Therefore, all the above expenses should be capitalized & amortized as per AS 26.