When is software capitalised in accordance with GRAP 31 on Intangible Assets?

The Public Sector Accounting Forum discussed this issue and noted that there is uncertainty in practice, and there has been a move from traditional software bought on a CD to online software. The following should be considered in assessing if software should be capitalised:

• The definition and recognition criteria of an asset, with reference to the specific terms and conditions of an arrangement and materiality.
• The software is separate from an entity’s right to use the software (e.g. a license to use software for a specified period). Control over software is likely to be with the developer. An entity may, by way of a license agreement, obtain control over a right to use software for a specified period of time.
• Costs related to the installation and “set-up” of software are also assessed using the definition and recognition criteria.

The OAG’s GRAP Accounting Guideline on Non-current Assets (Feb 2020) provides guidance on accounting for software and licenses and can be accessed here.