• The IASC Framework
• IAS 38, Intangible Assets

History

• Issued May 1998.
• Effective date: 1 June 1998.
• Superseded by and incorporated into IAS 16 (Revised 2003) effective: Annual periods beginning on or after 1 January 2005.

The issue is how to account for expenditures 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.

In accordance with paragraphs 89 and 90 of the Framework (and applying IAS 16.24 by analogy) expenditure incurred 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 consistent with IAS 38 Intangible Assets as well.

In addition, 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.