Hi there,

We have purchased a ?0K software package, which we have treated as an intangible asset.

I have read the IAS standards to see if I can capitalise the hours the consultants use to implement this software (another ?5K).

Any ideas?
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Hi there,

We have purchased a ?0K software package, which we have treated as an intangible asset.

I have read the IAS standards to see if I can capitalise the hours the consultants use to implement this software (another ?5K).

Any ideas?

you certainly can capitalise salaries and implementation costs if they were directly involved on the project, but why would you want too? If you were to treat them as revenue items you would get 100% tax relief on them instead of capital allowances. I'm sure you could be creative and argue both ways, capital or revenue.

Regards
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Why have you treated the software as an Intangible Fixed Asset?

It should be a Tangible Fixed Asset.

You should also be able to capitalise any costs which are incidental to installing the software including project management, configuration, testing etc.

This is certainly the way to go if you need to show increased profits within the company :)
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You should also be able to capitalise any costs which are incidental to installing the software including project management, configuration, testing etc.

This is certainly the way to go if you need to show increased profits within the company :)

As Alan indicates when an asset is purchased it is quite common for the accountants to include in the capital cost all associated expenses with the project because by doing so the net profit is increased which is highly desirable for a Plc who aim to show year on year profit growth.

On the other hand private companies whose objective is minimum tax liability would tend to be writing off as expenses or at least keeping to a minimum the commissioning costs.

Over the years I have been involved in both types of scenario.
The decision should be include in the capital costs the associated direct costs of obtaining the software, but all directors tend to have at least one eye on the effect on the net profit. Little manipulative but every company has a tendency to do what is best for them.
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