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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Kaveri Retail Ltd develops its own web site, which customers use to browse and order products, and incurs development costs on it. Under the Appendix to Ind AS 38 on web site costs, how is the web site treated?

An entity's own web site that arises from development, whether for internal or external access, is an internally generated intangible asset. It is therefore governed by Ind AS 38 and recognised only if the recognition criteria are met, not automatically expensed or treated as inventory.

  1. AAs an internally generated intangible asset subject to the requirements of Ind AS 38Correct
  2. BAs inventory held for sale under Ind AS 2
  3. CAs property, plant and equipment under Ind AS 16 in every case
  4. DAs an expense, because web sites can never be recognised as assets

Explanation

The Appendix states that an entity's own web site that arises from development and is for internal or external access is an internally generated intangible asset subject to Ind AS 38. It is not inventory, because Kaveri is not selling the web site to others. Treating it as an automatic expense ignores that the recognition criteria of Ind AS 38 can be met.

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