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CA Final · Financial Reporting · Ind AS 38 Intangible Assets

Sundaram Retail Ltd. develops its own web site, which is accessed by customers and staff, to display products and take orders. Under Ind AS 38 and the Appendix on Web Site Costs, how should the web site that arises from development be classified?

An entity's own web site that arises from development, for internal or external access, is an internally generated intangible asset subject to Ind AS 38. It is not inventory or PPE, and it is not always expensed, because it is recognised as an asset when the recognition criteria are satisfied.

  1. AAn internally generated intangible asset subject to the requirements of Ind AS 38Correct
  2. BInventory under Ind AS 2, because it supports sales
  3. CAn item of property, plant and equipment under Ind AS 16
  4. DAn expense of the period in all circumstances, with no asset recognised

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. Inventory treatment would apply only to a web site held for sale in the ordinary course of business, which is not the case here. Expensing in all circumstances is wrong because the recognition criteria can be met.

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