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How does their treatment compare with the requirements of relevant accounting standards, UIGs or SACs or the Corporations Act (2001)? ...
Relevant accounting standards.
Commonwealth entities are expected to account for software costs in accordance with the requirements of Australian Accounting Standards and the accounting and reporting requirements set by the Finance Minister. There is currently no Australian Accounting Standard that comprehensively addresses the accounting treatment and disclosure requirements relating to intangible assets. Accounting for software is subject to a number of standards including
• AAS 21—Acquisitions of Assets;
• AASB 1041—Revaluation of Non-current Assets;
• AAS 29—Financial Reporting by Government Departments,
• AAS 4—Depreciation ,
• AAS 13—Accounting for Research and Development Costs.
The two standards providing the most insight into accounting for software are :
• AAS 13—Accounting for Research and Development Costs
Under AAS 13 the costs of research and development activities could be treated, as an expense and be charged to the profit and loss account in the period in which they are incurred, or be deferred and amortised over future periods in order to match the costs of the activities with the benefits which derive from them. ...
This sets a basis when accounting for software costs. The banks should expense planning and research activities in relation to their internally generated software whilst capitalizing most development costs incurred.
AAS 4—Depreciation
While software assets are subject to the requirements of AAS4 Depreciation, the term amortisation is often used in relation to intangible assets, which generally includes software assets. ...
The accumulated amortisation must be presented as a deduction from software assets in the Statement of Financial Position. The following information must also be disclosed for software assets as derived from (AAS 4 para 11.2):
(a) the amortisation method used;
(b) the useful life or the amortisation rates used;
(c) the aggregate amount of amortisation allocated as an expense during the
reporting period; and
(d) the gross amount of software and the related accumulated amortisation. ... The FMOs outline the requirements and guidance for the preparation of financial statements of Australian Government entities. One of the main purposes of the FMOs is to ensure consistency of accounting policy choices across government entities where Australian Accounting Standards allow choices. FMO 3b provides the most current information regarding the treatment for software for Australian entities.
FMO 3B Internal Use Software States:
- Internally developed and externally acquired computer software for internal use must initially be recognised and, where applicable, capitalised at the cost of development or acquisition.
- After initial recognition, internal use software should be carried at its cost, less any accumulated amortisation and any accumulated write downs.
Approximate Word count = 2131
Approximate Pages = 8.5
(250 words per page double spaced)
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