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

Kaveri Software Ltd builds web site software that it sells to other companies as a product in its ordinary course of business. How does Ind AS 38 and its web site costs Appendix treat the expenditure on this software?

The Appendix does not apply. Ind AS 38 excludes intangible assets held for sale in the ordinary course of business, which are dealt with under Ind AS 2 and Ind AS 115, and the web site Appendix likewise excludes web site software developed for sale to another entity.

  1. AThe Appendix applies, so costs are capitalised as an intangible asset
  2. BThe Appendix 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. CThe Appendix applies only to the operating-stage costs of the software
  4. DThe Appendix applies, but only if the software is amortised over 10 years

Explanation

Ind AS 38 does not apply to intangible assets held for sale in the ordinary course of business (see Ind AS 2 and Ind AS 115). The Appendix therefore does not cover web site software developed for sale to another entity. Option A wrongly assumes the web site guidance covers goods held for sale.

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