For depreciation purpose, is scrap value considered in software ?
Replies (11)
Quick Summary
This discussion clarifies the treatment of scrap and residual value for software as an intangible asset. Generally, the residual value of software is assumed to be zero unless there's a third-party commitment to buy it or an active market exists. If software's useful life is under a year, its full purchase price is expensed. Depreciation for tax purposes should follow IT Act rules, while company accounts may use different formulas.
75. The residual value of an intangible asset should be assumed to be zero unless:
(a) there is a commitment by a third party to purchase the asset at the end of its useful life; or
(b) there is an active market for the asset and:
(i) residual value can be determined by reference to that
market; and
(ii) it is probable that such a market will exist at the end of the asset's useful life.
76. A residual value other than zero implies that an enterprise expects to dispose of the intangible asset before the end of its economic life.
75. The residual value of an intangible asset should be assumed to be zero unless: (a) there is a commitment by a third party to purchase the asset at the end of its useful life; or (b) there is an active market for the asset and: (i) residual value can be determined by reference to that market; and (ii) it is probable that such a market will exist at the end of the asset's useful life. 76. A residual value other than zero implies that an enterprise expects to dispose of the intangible asset before the end of its economic life.