Dear Friends,
Method of accounting of Software Code under development, and the code already developed, by a software company, while merging the firms and in the running company. Whether we have to treat it as a fixed asset or inventory.
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Accounting of Software Under Development by a Software Company
Replies (4)
Quick Summary
Any software should be treated as intangible assets
Research costs are expensed and development costs are capitalised
Since the software has already been developed, you may treat it as a fixed asset I think.
Intangible assets don’t arise out of inventory. If you have capitalised a development cost in one company and merged it with other company, it will be recognised as intangible asset still in parent consolidated and subsidiary.
As you spend money, some are expensed and some are capitalised. They are like
a) costs of materials and services used or consumed in generating the intangible asset;
(b) costs of employee benefits (as defined in Ind AS 19) arising from the generation of the intangible asset;
(c) fees to register a legal right; and
(d) amortisation of patents and licences that are used to generate the intangible asset.
All of the above form intangible assets. I think, in AS’s standard, it is included in gross fixed asset block. As per IndAS, it is under current & non current assets as per its useful life.
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