Websites are an asset, so it's important to understand if your website is a fixed asset. Most people consider website development to be a cost for the company, as design, content, and development come at a price. The creation of a completely new website or the addition of significant new functionality for that website will be included in capital expenditures. Generally, the cost incurred for creating, designing, developing, and programming a website will be treated as a capital asset.
It's also the time when the company can purchase all the hardware needed to support the website. These purchases will follow existing capitalization policies, will be included in the balance sheet and will be amortized. If a company uses a third party to design, develop, create and program the website, it will treat the costs of creating a website in the same way as computer software. In view of the lack of guidance in FRS 102, it is conceivable that some entities would classify software and website development costs as intangible assets, whereas under current UK GAAP they would have been classified as tangible assets.
Therefore, you should extend the existing guide on other topics to the topic of website development costs. If you opt for the position that your website is primarily advertising, you can currently deduct the website's internal software development costs as an ordinary and necessary business expense. Once you've confirmed that your website is a fixed asset, you can include all the costs of launching the website to determine the cost of the website that should be treated as a fixed asset. Whether software and website development costs are treated as intangible or tangible assets, the estimated cost may be fair value on the transition date or a previous revaluation of GAAP on the revaluation date.
While the website of an accounting firm with details about the company and its services would not be a fixed asset. UITF 29 applies the above principles of FRS 10 to website development costs (not to website planning costs that cannot be capitalized) and requires that all of these costs be classified as tangible fixed assets. FRS 102 does not address the classification of software and website costs and, therefore, each entity must develop and apply an appropriate accounting policy to classify such costs as tangible fixed assets or intangible assets. Once your website is launched, the ongoing costs of hosting, maintenance, and product updates cannot be capitalized as a fixed asset.
Treating your website as a fixed asset means that the cost is capitalized on the balance and amortized over several years. Nonprofit organizations should carefully examine the costs of the website and assign them to the appropriate stage of development to determine their appropriate accounting treatment.
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