Skip to content

CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Bharat Digital Ltd builds web sites for clients and sells them to other entities as part of its ordinary business. It asks whether the Appendix on web site costs under Ind AS 38 applies to the cost of developing these web sites. What is the correct position?

The Appendix does not apply. Ind AS 38 excludes intangible assets held for sale in the ordinary course of business, which are dealt with under Ind AS 2 and Ind AS 115. Web sites developed for sale to other entities therefore fall outside the web site cost Appendix.

  1. AThe Appendix applies, and the costs are capitalised as intangible assets
  2. BThe Appendix does not apply, because Ind AS 38 does not cover intangible assets held for sale in the ordinary course of business, which fall under Ind AS 2 and Ind AS 115Correct
  3. CThe Appendix applies only if the clients are related parties
  4. DThe Appendix applies only to the extent of the client's use of the web site

Explanation

Ind AS 38 does not apply to intangible assets held for sale in the ordinary course of business (see Ind AS 2 and Ind AS 115). The Appendix therefore does not apply to expenditure on a web site developed for sale to another entity. Capitalising the cost as an intangible asset would wrongly bring it within Ind AS 38.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 38 Intangible Assets shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 38 Intangible AssetsFree diagnostic mock

More Ind AS 38 Intangible Assets questions