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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Bharat Software Ltd develops web sites and sells them to customers as part of its ordinary business. Which statement about the web site costs Appendix to Ind AS 38 is correct for the web sites it builds for sale?

The web site Appendix does not apply to web sites developed for sale to another entity. Intangible assets held for sale in the ordinary course of business are outside Ind AS 38 and are dealt with under Ind AS 2 and Ind AS 115.

  1. AThe Appendix applies, and the costs are capitalised as intangible assets
  2. BThe Appendix does not apply because they are intangible assets held for sale in the ordinary course of business, covered by Ind AS 2 and Ind AS 115Correct
  3. CThe Appendix applies only if the customers are related parties
  4. DThe Appendix applies, but only the operating costs are expensed

Explanation

Ind AS 38 does not apply to intangible assets held for sale in the ordinary course of business, which fall under 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. Option A is wrong for this reason.

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