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.
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Treatment of perpetual license expenses
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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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