LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Accounting of Software Under Development by a Software Company

VIGNESH SC BOSE (Business Advisor (Legal & Compliance)) (302 Points)

23 April 2021

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.

Reply
Follow
Share

4 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 23 April 2021

Any software should be treated as intangible assets

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 23 April 2021

Research costs are expensed and development costs are capitalised

CMA Poornima Madhava (CMA) (13097 Points)
Replied 23 April 2021

Since the software has already been developed, you may treat it as a fixed asset I think.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 23 April 2021

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.