UK Website as Intangible Asset

[AlexDoug]

Hi, I'm filling my first micro-entity Balance Sheet for an IT company. It just has cash at the time of the balance sheet date and the website used for the activity valued based on the hours dedicated and a cost/hour. So I want to know what should I include to balance this intangible asset internally generated and how I should depreciate it? Thanks!

 

[Fidget]

you don't capitalise internally generated intangible assets unless they fall into the R&D category, which doesn't sound like it in this case.

 

[Bad Medicine]

But .. the domain name is an intangible asset, as well as the copyrights ...

 

[Fidget]

where things like domain names, copyrights, licenses, trademarks, brand names etc appear as intangible assets, it's more likely because they've been purchased rather than internally generated. The general rule with intangible assets is that if the asset is the result of expenditure incurred internally, then it doesn't qualify for recognition on the balance sheet.

 

[DerrickWD]

"Generally, costs incurred to develop, maintain, or restore intangible assets are recognized as an expense when incurred. Exceptions include costs associated with computer software intended to be sold, Web site development, and computer software for internal use." - Deloitte

 

[DerrickWD]

"Paragraph 57 of IAS 38 indicates that costs incurred in the development phase are capitalized only if an entity can demonstrate all the following:

a. the technical feasibility of completing the intangible asset so that it will be available for use or sale.
b. its intention to complete the intangible asset and use or sell it.
c. its ability to use or sell the intangible asset.
d. how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.
e. the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
f. its ability to measure reliably the expenditure attributable to the intangible asset during its development."

You would balance the intangible asset debit with the credits to wages payable, cash, and other assets used or liabilities incurred in relation to the development of the website.