02 June 2012
Software is required to be treated as an intangible asset under AS-26.
This should be amortised at the lower of the Schdule XIV rate or the useful life thereof.
In practice, a bought out application software (enterprise-specific for sales and debtors) is usually charged off as an expense whilst operating software (like Windows operating system) is capitalised in the books. Where significant cost is incurred on acquiring right to use it say on ERP packages, the initial cost is usually capitalised and for any subsequent upgrades or modification, there are mixed practices of capitalisation and charge-off as expense.
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