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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Bharat Digital Ltd. develops web sites for clients and also develops a web site for sale to a customer, Sunrise Retail. Separately, it leases web site software to another entity, which Bharat accounts for under Ind AS 116. How does the Appendix on web site costs apply to expenditure on these two items?

The Appendix applies to neither item. Expenditure on a web site or web site software developed for sale to another entity, or accounted for under Ind AS 116, is excluded, because Ind AS 38 does not cover intangibles held for sale in the ordinary course or leases governed by Ind AS 116.

  1. AIt applies to both, because both involve web site development
  2. BIt applies to the web site developed for sale but not to the leased software
  3. CIt applies to the leased software but not to the web site developed for sale
  4. DIt applies to neither, because the web site is for sale to another entity and the lease is accounted for under Ind AS 116Correct

Explanation

Ind AS 38 does not apply to intangible assets held for sale in the ordinary course of business (Ind AS 2 and Ind AS 115 apply) or to leases of intangibles under Ind AS 116. Accordingly, the Appendix does not apply to a web site for sale to another entity or one accounted for under Ind AS 116. Both items are therefore outside it.

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