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1- ma’am i wanted to understand why are advertising costs NOT capitalised under IAS 38? they can be reliably measured, they arise out of separate contractual rights (e.g. broadcasting rights) and it is probable that economic benefits will flow to the entity…
2- why are internally developed software costs capitalised?
Thank you in advance!
1. because IAS 38 says so (!) – this para from IAS 38 BC:
“IAS 38 also clarifies that expenditure on research, training, advertising and
start-up activities will not result in the creation of an intangible asset that can be
recognised in the financial statements. Whilst some view these requirements
and guidance as being too restrictive and arbitrary, they are based on IASC’s
interpretation of the application of the recognition criteria in IAS 38.”Of course, if a company has paid for an advertising campaign over a period of time, a prepayment would be recognised at the reporting date for the unexpired period (as for any expense).
2. Capitalisation is not “automatic” – any company developing software must be able to DEMONSTRATE ALL six criteria for recognition of an intangible asset (assumed knowledge of FA/FR/SBR).
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