Should the website be capitalized?

[Moon]

Salam,

Well the question of the hour is whether to capitalize expenditure on developing the website or not and to remember that the amount is material so the IAS/IFRS applies to the transactions.
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Invest your hard work today for a success benefit tomorrow

[Augustus]

Yes, the expenditure on web site development can be capitalzed, if such expnese is material and meet the criteria mention in IAS-38-intangible assets, but all other expenditures on running and maintanance should be write off in the period in which they are incurred.

[Moon]

Salam,

Well IAS 38 talks about future economic benefit(FEB). How would you measure the FEB of the web site?
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Invest your hard work today for a success benefit tomorrow

[Sarfaraz]

AOA
1 Better service to ur customers; result increase in sales
2 online payments; e business etc

There is a will. There is a way

[Augustus]

requires an enterprise to recognise an intangible asset, whether purchased or self-created (at cost) if, and only if [

1. it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and
2. the cost of the asset can be measured reliably.

So at the time of deveoping web site thes two conditions can be estimated very easily as sales growth can be forecasted in advance and ofcourse if u outsource ur web site development then u will negiotate the contract with a software house and defintely u will be able to assess the cost of the software in advance.

[Moon]

Salam

I agree with the standard provisions but how would you measure the %age of sales as fetched by the expenditure on the web site development. practically you do not ask your customer how he is approacing the business concern for procurement.

Invest your hard work today for a success benefit tomorrow

[Augustus]

Well Mr. Moon, practically u can never expect exact percentage of sales expected to rise by incurring capital expenditure but while conducting a survey and growing market u can make good evaluation regarding incerease in %age of sales

[Moon]

Salam

How would you measure the usefule life of a website knowing that there has been major frequent development in the web development technology.