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Hi Everyone, hope you could help me on the following scenario whether the cost qualify for recognition as Intangible Assets. I have tried to find the relevant materials online. However, I’m still uncertain whether it qualifies.
Scenario:
A Company engaged 2 external vendors to develop a virtual tour on its showroom.It allow for an immersive experience of the Company’s solutions at its convenience. It can share screen with their customers by logging in to the tour on their laptops or other digital devices. This virtual tour will and can be their marketing support tool to facilitate better interaction with its customers to understand visually in depth of the various solutions that Company can provide.
This virtual tour is currently only available for its staff and will be launch publicly at later date.
Vendor A: Provide the videography services on our showroom such as video shoot, subsequent revision to video, licensed music and basic text animation.
Vendor B: Provide coordination, logistics & technical management for the production such as color grading, stitching, editing, web concept and design standard functions, frontend & backend development of WebVR experience, security login setup, User data analytics capability and standard annual maintenance service.
Can the cost charged by Vendor A & Vendor B to develop the Company Virtual tour be recognize as Intangible Asset?
Feel free to share your opinion and materials. Thank you very much.
This sounds like a practical scenario for which you are wanting a consultant account to advise – rather than an exam-related question which should be asked under the relevant ACCA or CIMA exam – e.g. ACCA Financial Reporting.
If you download the relevant notes here https://opentuition.com/acca/fr you will find a theoretical response on page 29 – which is that development costs can only be capitalised from the points in time when all SIX of the listed criteria are met. Then the amount that can be capitalised (i.e. recognised as an intangible asset) cannot exceed probable future economic benefits. The company’s accountant should find further details in IAS 38. The different components of cost would have to be broken down and any “revenue expense” items expensed to profit and loss in the periods to which they relate – e.g. annual maintenance.
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