Ifrs Capitalization Of Software Projects

A list of completed Standard-setting projects by name, and their effective dates.

Ifrs Capitalization Of Software Projects 2017 Updated September 26, 2017 Business expenditures can be divided into either revenue expenditures or capital expenditures. Capitalization of internal-use software costs is an area where companies often misapply GAAP (Codification Topic 350-40). Software intended for internal use includes back office systems, such as general ledger or billing modules, and platforms where software as.

The definition of an “asset” and “capitalization,” and as well recall the spirit of ASC 350-40 and SOP 98-1. The three stages of an IT project outlined in SOP 98-1 for internal use software development can be applied to agile as well as waterfall-developed software projects.

Project nameEffective date
2015 Amendments to the IFRS for SMEs Standard1 January 2017
Clarifications to IFRS 15 Revenue from Contracts with Customers1 January 2018
Conceptual Framework for Financial Reporting 20101 January 2018
Conceptual Framework for Financial Reporting 20181 January 2020
IAS 1 Presentation of Financial Statements (Revised)1 January 2009
IAS 19 Employee Benefits (Revised)1 January 2013
IFRS 3 Business Combinations (Revised)1 July 2009
IFRS 8 Operating Segments1 January 2009
IFRS 9 Financial Instruments: Classification and Measurement1 January 2018
IFRS 9 Financial Instruments: Hedge Accounting1 January 2018
IFRS 9 Financial Instruments: Impairment1 January 2018
IFRS 10 Consolidated Financial Statements1 January 2013
IFRS 11 Joint Arrangements1 January 2013
IFRS 12 Disclosure of Interests in Other Entities1 January 2013
IFRS 13 Fair Value Measurement1 January 2013
IFRS 14 Regulatory Deferral Accounts1 January 2016
IFRS 15 Revenue from Contracts with Customers1 January 2018
IFRS 16 Leases1 January 2019
IFRS 17 Insurance Contracts1 January 2023
IFRS for SMEs Standard9 July 2009 (subject to jurisdictional adoption)
IFRS Practice Statement 1: Management Commentary
IFRS Practice Statement 2: Making Materiality Judgements
Rate-regulated Activities (initial project)

IFRS and US GAAP

IFRS does not address software development costs directly and some IFRS interpreters actually take the position that costs associated with internally developed software should not be capitalized. However, IFRS states that management may consider more recent “pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards” and therefore it is possible to argue that best practice under IFRS might be to consider pertinent US GAAP.

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Ifrs Capitalization Of Software Projects Applications

US GAAP is very explicit in terms of accounting for software development costs (expensed versus capitalized). “

  • Internal and external costs incurred during the preliminary project stage shall be expensed as they are incurred.
  • Internal and external costs incurred to develop internal-use computer software during the application development stage shall be capitalized.
  • Costs to develop or obtain software that allows for access to or conversion of old data by new systems shall also be capitalized.
  • Training costs are not internal-use software development costs and, if incurred during this stage, shall be expensed as incurred.
  • Data conversion costs, except as noted in paragraph 350-40-25-3, shall be expensed as incurred.
  • Internal and external training costs and maintenance costs during the post-implementation operation stage shall be expensed as incurred.”


For ERP Projects, and in our case as a Microsoft Partner these are typically Microsoft Dynamics AX, Microsoft Dynamics NAV, or Microsoft Dynamics CRM projects, the service costs associated with an implementation are subject to the accounting rules above. Software licenses should be capitalized. So license costs associated with the aforementioned products (Axapta, Navision, and Microsoft CRM) can be capitalized unless they are purchased under a SAAS pricing model (Software as a Service); in this case they should be expenses as incurred.

Ifrs Capitalization Of Software Projects

If you need help understanding the accounting implications associated with the costs of your software/ERP project, let us know and we can help implement a process for tracking your project’s costs that will comply with your audit requirements. We can help you implement a work breakdown structure (WBS) that is aligned with the accounting rules so that you are consistent with how you capitalize and expense software project costs.

Ifrs Capitalization Of Software Projects Pdf

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