• IAS 38, Intangible Assets

  SIC D32 Issued July 2001.

  Because the proposal in SIC D32 to expense initial graphic design costs differs from the requirements of IASB's liaison standard setters, the IASB did not approve a final Interpretation in December 2001. Instead, the IASB concluded to ask SIC to consider certain revisions relating to graphic design costs. IFRIC considered and agreed to those revisions at its meeting in February 2002.

  At its March 2002 meeting, the Board approved issuance of SIC 32, Intangible Assets - Website Costs, as a final Interpretation. Web site graphic design costs will be capitalised if they satisfy the IAS 38 tests for an intangible asset but will be charged to expense if they are in the nature of advertising.

  Note: Summary below is of the Draft Interpretation. Draft Interpretations are proposals that are not yet final.

SIC D32 addresses the accounting for an internal expenditure to develop, enhance, and maintain a website by an enterprise for its own use. Specifically, it addresses the application of IAS 38, Intangible Assets to website development costs.

SIC D32 identifies the following stages of website development:

• planning
• application and infrastructure development
• graphical design and content development
• operating

SIC D32 proposes that:

• A website developed by an enterprise for its own use is an internally generated intangible asset that is subject to the requirements of IAS 38.
• The planning stage of website development is similar in nature to the research phase described in IAS 38.42-44 and, therefore, an expenditure incurred in this stage should be recognised as an expense when it is incurred,
• The application and infrastructure development stage and the graphical design and content development stage of website development are similar in nature to the development phase in IAS 38.45-52. Therefore, expenditures incurred in these stages are eligible for recognition as an intangible asset if, first, they meet the general requirements of IAS 38 for recognition and initial measurement of an intangible asset and, second, the enterprise can demonstrate that the conditions in IAS 38.45 are met. In addition:
  • an enterprise may be able to demonstrate how its website will generate probable future economic benefits under IAS 38.45(d) by using the principles in IAS 36, Impairment of Assets. This includes situations where the website is developed solely or primarily for promoting and advertising an enterprise's own products and services; and
  • an enterprise may incur an expenditure to enable use of content, which had been purchased or created for another purpose, on its website (e.g., acquiring a license to reproduce information) or may purchase or create content specifically for use on its website prior to the website becoming available for use. In such circumstances, an enterprise should determine whether a separate asset is identifiable with respect to such content (e.g., copyrights and licenses), and if a separate asset is not identifiable, then the expenditure should be included in the cost of developing the website when the expenditure meets the conditions in IAS 38.54.
• the operating stage commences once the website is available for use, and therefore an expenditure to maintain or enhance the website after development has been completed should be recognised as an expense when it is incurred unless it meets the criteria in IAS 38.60.

  Issued for public comment on 9 July 2001. Comment deadline 10 September.

  Click for IASC Press Release on SIC D28 to D32 (PDF 44k)