Costs of Modifying Existing Software (SIC-06)
An Interpretation of the IASC Framework and IAS 38, Intangible Assets
- Issued May 1998.
- Effective date: 1 June 1998.
The issue is how expenditure such as those for modifications necessary to prepare existing software systems for the turn of the millennium (often referred to as "Year 2000 Costs") or the introduction of the euro should be accounted for. The SIC agreed that in accordance with paragraphs 89 and 90 of the Framework (and applying IAS 16.24 by analogy) expenditure incurred in order to restore or maintain the future economic benefits that an enterprise expected from the original standard of performance of existing software systems should not be capitalised. This solution is in compliance with IAS 38, Intangible Assets, as well.
In addition, the SIC agreed that expenditure should be recognised as incurred in accordance with paragraphs 94-98 of the Framework, that is, for work undertaken "in house", as materials are used or labour time is consumed. For work undertaken by external contractors, expenditure should be recognised only as the work is carried out. The Interpretation does not apply to purchased software.
Note: Please note that these summaries are only for reference purposes and are not a substitute for the entire SIC. Kindly read the whole text of SIC before consulting these summaries.
Summaries are courtesy of Deloitte.
More SIC Summaries
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- SIC-03 - Elimination of Unrealised Profits and Losses on Transactions with Associates
- SIC-05 - Classification of Financial Instruments - Contingent Settlement Provisions
- SIC-06 - Costs of Modifying Existing Software
- SIC-07 - Introduction of the Euro
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- SIC-13 - Jointly Controlled Entities - Non-Monetary Contributions by Venturers
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- SIC-16 - Share Capital - Reacquired Own Equity Instruments (Treasury Shares)
- SIC-17 - Equity - Costs of an Equity Transaction
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- SIC-20 - Equity Accounting Method - Recognition of Losses
- SIC-21 - Income Taxes - Recovery of Revalued Non-Depreciable Assets
- SIC-22 - Business Combinations - Subsequent Adjustment of Fair Values and Goodwill Initially Reported
- SIC-23 - Property, Plant and Equipment - Major Inspection or Overhaul Costs
- SIC-24 - Earnings Per Share - Financial Instruments that May Be Settled in Shares
- SIC-25 - Income Taxes - Changes in the Tax Status of an Enterprise or its Shareholders
- SIC-27 - Evaluating the Substance of Transactions in the Legal Form of a Lease
- SIC-28 - Business Combinations - 'Date of Exchange' and Fair Value of Equity Instruments
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