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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Nirmaan Digital Ltd. builds web sites for sale to client companies and holds these web sites as products to be sold in its ordinary course of business. The finance team asks whether the Ind AS 38 web site costs Appendix governs its development costs. What is the correct position?

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, so web sites developed for sale to clients fall outside the Appendix.

  1. AThe Appendix applies because every web site is an intangible asset
  2. BThe Appendix does not apply to web site expenditure for sale to another entity; such items fall under Ind AS 2 and Ind AS 115Correct
  3. CThe Appendix applies but only for the operating phase
  4. DThe Appendix applies if the web site is later leased out under Ind AS 116

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 apply to expenditure on a web site for sale to another entity. The leasing option is wrong, since the Appendix also excludes web sites accounted for under Ind AS 116.

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