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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Brightsoft Solutions Ltd. is a software house that builds web sites for client companies and sells them in the ordinary course of business. The costs incurred on a web site built for a client, which will be transferred to that client, are being considered. Under the scope of the Appendix on web site costs to Ind AS 38, what is the position?

The Appendix does not apply. Ind AS 38 excludes intangible assets held for sale in the ordinary course of business, which fall under Ind AS 2 and Ind AS 115. A web site built for sale to a client is therefore outside the Appendix on web site costs.

  1. AThe Appendix applies, and the costs are capitalised as an internally generated intangible asset
  2. BThe Appendix does not apply, because the web site is developed for sale to another entity and is covered by Ind AS 2 or Ind AS 115Correct
  3. CThe Appendix applies only to the extent of design costs
  4. DThe Appendix applies, and the costs are taken to other comprehensive income

Explanation

Ind AS 38 does not apply to intangible assets held for sale in the ordinary course of business, which are dealt with 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 wrongly applies the Appendix to such costs.

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