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CMA Final · Corporate Financial Reporting · Intangible Assets (Ind AS 38)

Kaveri Softech Ltd holds a licence of a software product that it buys and sells to customers in the ordinary course of its trading business. Which statement is correct regarding Ind AS 38 for this software held for sale?

Ind AS 38 does not apply to intangible assets held for sale in the ordinary course of business. Such items are dealt with under Ind AS 2 and Ind AS 115, so Kaveri would not amortise the traded software under Ind AS 38.

  1. AInd AS 38 applies and the software is amortised over its useful life
  2. BInd AS 38 does not apply because intangible assets held for sale in the ordinary course of business fall under Ind AS 2 and Ind AS 115Correct
  3. CInd AS 38 applies but only the impairment rules of Ind AS 36 are skipped
  4. DInd AS 38 applies only if the software is held for more than 12 months

Explanation

Ind AS 38 does not apply to intangible assets held by an entity for sale in the ordinary course of business, which are dealt with under Ind AS 2 and Ind AS 115. Hence amortisation under Ind AS 38 is not the treatment for this trading stock of software.

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