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I thought IAS 38 allows intangible assets to be capitalised if it is probable that its expected to generate future economic benefit to the entity.
In -pass paper 12/2011 (Sramble), why would the maintenance costs not be capitalised if it is probable that future benefits may be generated to scramble of the production of the computer games.?
Karen, I’ve just read the printed solution and cannot see why you are confused!
I copy it here:- “The internally generated intangibles are capitalised in accordance with IAS 38, Intangible Assets. It appears that Scramble is correctly expensing the maintenance costs as these do not enhance the asset over and above original benefits.
The decision to keep intangibles at historical cost is a matter of choice and therefore policy. Scramble’s accounting policy in this regard is acceptable.”The answer clearly explains that to keep intangibles at historic cost is a matter of choice and therefore accounting policy. I suppose that if Scrable had chosen an alternative policy, they could justifiably have argued that “the maintenance costs DO enhance the asset” but such further expenditure, to be available for capitalisation, should IMPROVE the revenue stream beyond previous expectations and not simply prolong the asset’s life
is that ok?
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