Software development costs
Assess the software and associated expenditure under the applicable standards, including IAS 38 for qualifying intangible assets. Expense research-phase costs and capitalise development costs only from the date all IAS 38 criteria are demonstrated. Exclude costs that do not meet the recognition requirements, and amortise a finite-life asset from when it is available for use. Software integral to related hardware may require different classification depending on the facts.
Worked example
A company demonstrates all IAS 38 development criteria on 1 July. It incurs $80,000 of eligible costs after that date and $20,000 before it. Subject to all requirements, capitalise $80,000 and do not reinstate the earlier $20,000 previously expensed.
Common mistake
Capitalising all software research and development costs from project inception, or assuming every software cost is an immediately recognised intangible asset.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |