Good Morning to all CCI Members
Can any one answer me that if a company purchase a XBRL Tool for Rs. 11000, then what is the accounting treatment of such software, whether it should capitalised or not.
Kindly give me answer with reason.
Thanking You
7 Replies
praveen
(Chartered Accountant)
(6971 Points)
Replied 23 December 2011
To classify the assets as fixed asset you have to verify the following.
a) whether the benefit of the asset is accrued for a period more than 1 year.
b) Ownership of the asset.
c) Materiality.
In your case the xbrl tool might be such that you can use it only for 1 year. if such is the case then you can fully charge it to expenses.
Z
( )
(2965 Points)
Replied 23 December 2011
It is software for internal use ,which is part of appendix of AS-26. APENDIX provides the illustrative application of the PRINCIPLES laid down in the STANDARD to internal use of software
13. The depreciable amount of a software should be allocated on a
systematic basis over the best estimate of its useful life. The amortisation
should commence when the software is available for use.
There is a rebuttable assumption that the estimated useful life of the software shall be 3-5 years
Edit: systematic basis over the best estimate of its useful life and rebuttable assumption means that any period (including less than 1 year can be used for amortisation)
More detail in
Madhusudan Kabra
(knowledge seeker)
(1779 Points)
Replied 23 December 2011
XBRL tool remain valid only for a year...hence should be charged to p&l in the same year.
Regards
Madhusudan
CA Kiran Sutrave
(CA)
(428 Points)
Replied 23 December 2011
XBRL Tool purchased by you is valid only for a year and hence it is not to be capitalised. Praveen has given explained it precisely.
Z
( )
(2965 Points)
Replied 23 December 2011
The entire amount can be written off in P&L a/c in the same year but provisions of appendix A of AS-26 will apply
Para 13 clearly states
The depreciable amount of a software should be allocated on a
systematic basis over the best estimate of its useful life. The amortisation
should commence when the software is available for use
If the useful estimated life is less than one year then it can be writenn off in same year
There is a rebuttable assumption that the estimated useful life of the software shall be 3-5 years
this is an emplied assumption unless there is something contrary like in this case
Asset is to be capitalized and written off in same year
Don't we capitalized the asset liable to 100% depriciation and writeoff within the same year?
Please clarify Where my understanding is wrong
Praveen Kumar
(Manager - Finance & Accounts)
(189 Points)
Replied 24 December 2011
It is w/o in same year in P& l A/c with full amount
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