Capitalization of Sharepoint development

Hi Kruti,

Great question! Here's how you can approach the capitalization of SharePoint development costs under accounting standards:

Is SharePoint development considered software development?

• SharePoint is a software platform, and building/customizing a SharePoint-based portal typically involves software development or customization.

• If your client is paying PWC for designing, developing, and implementing a customized SharePoint portal(not just buying licenses), this cost relates to software development.

Should the cost be capitalized?

According to accounting standards (e.g., Ind AS 38 / IAS 38 – Intangible Assets):

• Costs directly attributable to creating, producing, and preparing the software for use should be capitalized as an intangible asset.

• Capitalization criteria include:

  • The project is technically feasible.

  • The entity has the intention and ability to complete the software and use or sell it.

  • The software will generate probable future economic benefits.

  • The costs can be reliably measured.

• Costs related to research or preliminary project phases, training, or ongoing maintenance should be expensed.

So in your case:

• The fees paid to PWC for implementation and development of SharePoint portal can be capitalized as intangible assets if they meet the above criteria.

• Costs like license fees for standard SharePoint software should be treated as intangible assets but separate from development costs.

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