Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Capitalization of license of sap

Pradeep Patankar (IFRS ( London)) (289 Points)

18 July 2012

Dear Friends / Experts,

I have a doubt relating to the capitalization of License of SAP and its amortization.

Suppose a Company has acquired the license of SAP in accounting year 2011-12 but till date the actual system is in process of up-gradations for required outputs.

In such case do I need to amortize the license from accounting year 2011-12 or from the year of actual implementation of SAP?

Reply
Follow
Share

4 Replies

Pijush Roy (ERP SAP Functional Tester) (281 Points)
Replied 19 July 2012

No clear idea about this, but I guess some point.

If SAP licence fee should amortization over usefull life of this system. Software is a intangible assets & intangible asset accured cost should be amortization over is usefull life.

If usefull life not extimated, then it is better to amortization over 10 years.

Otherwise contact to the practising chartered accountant in charged.

Cheers

Upgrade to CAclubindia Pro. Subscribe Now!

Bhaskar Unnikrishnan CPA CMA (Accounts / Administration) (414 Points)
Replied 12 September 2012

I presume your question means the software in testing stage. You can capitalize such cost, but cannot ammortize until it is ready for intended use and placed in service.