Accounting

a) The main accounting policy issue is the definition of internally generated intangible assets and its recognition. According to Interpretation 132, when accounting for internal expenditure on the development and operation of an entity’s own web site, the issues are whether the web site costs is an internally generated intangible asset that is subject to the requirements of AASB 138 and the appropriate accounting treatment of such expenditures.

b) According to AASB 138.52, the Antiques Galore Ltd should classify the website costs into a research phase or development phase in order to assess whether the costs meet the criteria for recognition of internally generated assets. From AASB 138.54, expenditure on research should be recognised as an expense, while in para.57, expenditure can be directly attributed to preparing the website can be recognised as assets and meets the recognition criteria in para.2. From interpretation 132.8, it also stated that costs which are complying with the requirements in AASB 138.21 for recognition and initial measurement, the costs can be recognised

c) The alternative policy can be using the cost model. According to AASB 138.74, an intangible asset shall be carried at its cost less any accumulated amortization and any accumulated impairment losses under the Cost Model. The website costs will be measured at the sum of all entry prices paid in the past to assemble, construct, or augment the website over an extended period of time, including the prices paid for acquisition-related goods or services.

2

Dates Details $

June-July IT department labour costs for developing code for on-line customer orders 87,000

28-Jul

Purchase and installation of security software to facilitate customer payment

by credit card for purchases 100,000

August

IT department labour costs for developing code to integrate the website orders

with the accounting information system 23,000

November IT department labour costs for stress testing all website...