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Treatment of perpetual license expenses

Suresh S (Finance Team) (2 Points)

21 February 2020  

Hi All.  Earlier perpetual software licenses were treated as operational expenses and their expenses were amortized over lifetime of the license ( Generally 4 years ). 
But this financial year it is treated as capital expense and the expenses are capitalized and depreciation is being booked. 
Is there's any change in Accounting standard because of which it is being done. 

 1 Replies

yasaswi gomes (My grammar is 💯 good I)   (6638 Points)
Replied 25 April 2020

I’m not sure. Intangible assets is still following the same method of accounting treatment related to finite and indefinite intangible assets.

Finite assets= Amortised for their useful life

Indefinite life assets= Cash will be generated perpetually, it will NOT be amortised, instead, it will be tested for impairment annually. If there is impairment, the reduction will be credited to the asset, while, when there is a revaluation gain, the gain is recognised in profit and loss. 

Intangible assets like licenses are never depreciated.

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