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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Kaveri Software Ltd. develops web sites and sells completed web sites to client companies in the ordinary course of its business. Kaveri asks whether the Appendix on Web Site Costs to Ind AS 38 governs its cost of building these web sites for clients. What is the correct position?

The Appendix does not apply to Kaveri's client web sites. Ind AS 38 excludes intangible assets held for sale in the ordinary course of business, and the Appendix excludes web sites developed for sale to another entity, so Ind AS 2 and Ind AS 115 govern instead.

  1. AThe Appendix applies, as all web site development costs must be treated as intangible assets
  2. BThe Appendix applies, but only for the operating-stage costs of the sites
  3. CThe Appendix does not apply, because intangible assets held for sale in the ordinary course of business are outside Ind AS 38 (see Ind AS 2 and Ind AS 115)Correct
  4. DThe Appendix applies only if the clients are related parties of Kaveri

Explanation

Ind AS 38 does not apply to intangible assets held for sale in the ordinary course of business, and the Appendix does not apply to expenditure on a web site developed for sale to another entity. Kaveri's sites are therefore dealt with under Ind AS 2 and Ind AS 115. Option A ignores this scope exclusion.

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