SIC Interpretation 32 Intangible Assets—Web Site Costs (SIC‑32) is set out in paragraphs 7–10. SIC‑32 is accompanied by a Basis for Conclusions and an example illustrating the application of the Interpretation. The scope and authority of Interpretations are set out in the Preface to IFRS Standards.
FOR THE ACCOMPANYING GUIDANCE LISTED BELOW, SEE PART B OF THIS EDITION
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ILLUSTRATIVE EXAMPLE | |
FOR THE BASIS FOR CONCLUSIONS, SEE PART C OF THIS EDITION
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BASIS FOR CONCLUSIONS |
IAS 1 Presentation of Financial Statements (as revised in 2007)
IAS 2 Inventories (as revised in 2003)
IAS 16 Property, Plant and Equipment (as revised in 2003)
IAS 36 Impairment of Assets (as revised in 2004)
IAS 38 Intangible Assets (as revised in 2004)
1 | An entity may incur internal expenditure on the development and operation of its own web site for internal or external access. A web site designed for external access may be used for various purposes such as to promote and advertise an entity’s own products and services, provide electronic services, and sell products and services. A web site designed for internal access may be used to store company policies and customer details, and search relevant information. |
2 | The stages of a web site’s development can be described as follows:
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3 | Once development of a web site has been completed, the Operating stage begins. During this stage, an entity maintains and enhances the applications, infrastructure, graphical design and content of the web site. |
4 | When accounting for internal expenditure on the development and operation of an entity’s own web site for internal or external access, the issues are:
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5 | This Interpretation does not apply to expenditure on purchasing, developing, and operating hardware (eg web servers, staging servers, production servers and Internet connections) of a web site. Such expenditure is accounted for under IAS 16. Additionally, when an entity incurs expenditure on an Internet service provider hosting the entity’s web site, the expenditure is recognised as an expense under IAS 1.88 and the Conceptual Framework for Financial Reporting when the services are received. |
6 | IAS 38 does not apply to intangible assets held by an entity for sale in the ordinary course of business (see IAS 2 and IFRS 15) or leases of intangible assets accounted for in accordance with IFRS 16 [Refer:IFRS 16 paragraph 4]. Accordingly, this Interpretation does not apply to expenditure on the development or operation of a web site (or web site software) for sale to another entity or that is accounted for in accordance with IFRS 16. |
7 | An entity’s own web site that arises from development and is for internal or external access is an internally generated intangible asset that is subject to the requirements of IAS 38. |
8 | A web site arising from development shall be recognised as an intangible asset if, and only if, in addition to complying with the general requirements described in IAS 38.21 for recognition and initial measurement, an entity can satisfy the requirements in IAS 38.57. In particular, an entity may be able to satisfy the requirement to demonstrate how its web site will generate probable future economic benefits in accordance with IAS 38.57(d) when, for example, the web site is capable of generating revenues, including direct revenues from enabling orders to be placed. An entity is not able to demonstrate how a web site developed solely or primarily for promoting and advertising its own products and services will generate probable future economic benefits, and consequently all expenditure on developing such a web site shall be recognised as an expense when incurred. |
9 | Any internal expenditure on the development and operation of an entity’s own web site shall be accounted for in accordance with IAS 38. The nature of each activity for which expenditure is incurred (eg training employees and maintaining the web site) and the web site’s stage of development or post‑development shall be evaluated to determine the appropriate accounting treatment (additional guidance is provided in the illustrative example accompanying this Interpretation). For example:
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10 | A web site that is recognised as an intangible asset under paragraph 8 of this Interpretation shall be measured after initial recognition by applying the requirements of IAS 38.72–.87. The best estimate of a web site’s useful life should be short. |
May 2001
This Interpretation becomes effective on 25 March 2002. The effects of adopting this Interpretation shall be accounted for using the transition requirements in the version of IAS 38 that was issued in 1998. Therefore, when a web site does not meet the criteria for recognition as an intangible asset, but was previously recognised as an asset, the item shall be derecognised at the date when this Interpretation becomes effective. When a web site exists and the expenditure to develop it meets the criteria for recognition as an intangible asset, but was not previously recognised as an asset, the intangible asset shall not be recognised at the date when this Interpretation becomes effective. When a web site exists and the expenditure to develop it meets the criteria for recognition as an intangible asset, was previously recognised as an asset and initially measured at cost, the amount initially recognised is deemed to have been properly determined.
IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In addition it amended paragraph 5. An entity shall apply those amendments for annual periods beginning on or after 1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier period, the amendments shall be applied for that earlier period.
IFRS 15 Revenue from Contracts with Customers, issued in May 2014, amended the ‘References’ section and paragraph 6. An entity shall apply that amendment when it applies IFRS 15.
IFRS 16, issued in January 2016, amended paragraph 6. An entity shall apply that amendment when it applies IFRS 16.
Amendments to References to the Conceptual Framework in IFRS Standards, issued in 2018, amended paragraph 5. An entity shall apply that amendment for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by Amendments to References to the Conceptual Framework in IFRS Standards. An entity shall apply the amendment to SIC‑32 retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendment to SIC‑32 by reference to paragraphs 23–28, 50–53 and 54F of IAS 8.