Paragraphs 10 and 11 of Appendix A to the Accounting Standard 26 on Intangible Assets,
lays down the following procedure for accounting of software acquired for internal use:-
lays down the following procedure for accounting of software acquired for internal use:-
- The cost of a software acquired for internal use should be recognised as an asset if it meets the recognition criteria prescribed in paragraphs 20 and 21 of this statement.
- The cost of a software purchased for internal use comprises its purchase price,including any import duties and other taxes (other than those subsequently recoverable by the enterprise from the taxing authorities) and any directly attributable expenditure on making the software ready for its use.
Any trade discounts and
rebates are deducted in arriving at the cost. In the determination of
cost, matters stated in paragraphs 24 to 34 of the Statement which deal
with the method of accounting for ‘Separate Acquisitions’, ‘Acquisitions
as a part of Amalgamations’, Acquisitions by way of Government Grant’,
and ‘Exchanges of Assets’, need to be considered, as appropriate.
Recognition criteria as per paragraphs 20 and 21 of the standard are stated below:-
- An intangible asset should be recognised if, and only if:
(a) it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and
(b) the cost of the asset can be measured reliably.
(b) the cost of the asset can be measured reliably.
- An enterprise should assess the probability of future economic benefits using reasonable and supportable assumptions that represent best estimate of the set of economic conditions that will exist over the useful life of the asset.