Recognition of Customized Software Under Development as Intangible Assets

A company is developing software and has incurred multiple expenditures before opening the software to the general public for subscription marketing for licensing to paid customers. To develop the software the company has also purchased some software from third parties to incorporate them into their software and hired the services of external professionals. The company has incurred the following expenditure including purchase price of imported software, employment costs engaged in customization, software testing costs, other directly related costs, professional fees, cost of training, cost of advertising, administrative and general overheads, etc.

The development took a period of nine months and finally became capable of operating in the manner intended by the management by the year end. The management of the company wants to know whether it can recognize the software as an intangible asset and if yes then what should be the amount of cost incurred in software development to be capitalized and what is the amount to be charged to P&L.

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