SIC-32
Active
Intangible Assets–Web Site Costs
Addresses the accounting for website development costs, confirming that a website is an internally generated intangible asset subject to IAS 38's recognition criteria, with planning stage costs expensed and development stage costs conditionally capitalised.
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Conceptual Framework Linkage
Why SIC-32 exists as a bridge interpretation
IAS 38 applies the same recognition criteria to ALL internally generated intangible assets, including those created through website development. However, website development projects span multiple stages – from initial planning and feasibility, through design and development, to ongoing maintenance and upgrades. SIC-32 clarifies how IAS 38's recognition criteria are applied across these stages, establishing that only the DEVELOPMENT stage generates an intangible asset; planning stage costs are expensed.
Without SIC-32, entities developing their own e-commerce platforms or business websites could have capitalised ALL costs from the outset – including feasibility studies, branding assessments, and planning contingencies – as an intangible asset, over-stating assets and under-stating early-period expenses.
Applying the IAS 38 research/development split to websites
SIC-32 maps the two-stage taxonomy of IAS 38 (research → development) onto the web development lifecycle. Planning and feasibility work is RESEARCH – it does not meet the recognition criteria and must be expensed. Once the entity has moved into the actual construction and construction-ready phase, the project enters DEVELOPMENT stage, and IAS 38's recognition criteria begin to apply.
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Scope & Definitions
What SIC-32 covers
SIC-32 applies to costs incurred in the development of a website BY the entity FOR its OWN use – not for sale to customers (which falls under IAS 2, Inventories). The site must be an internally generated intangible asset. Where a website is developed specifically for sale, it is inventory; where it is for the entity's own use, it is an intangible asset under IAS 38.
TYPICAL FACT PATTERNS
An e-commerce platform developed in-house to support the entity's own distribution operations A customer portal built for the entity's own use to service clients via self-service An internal resource hub created to support employee training and knowledge management An intranet site developed to replace an internal procurement system
Key definitions
Website (internally generated)
An internally generated intangible asset created through the development of a website for the entity's own use – subject to IAS 38's recognition criteria and split into planning (research) and development stages per SIC-32.
Software application
The underlying code, middleware, and database infrastructure that enables the website to function – treated separately from graphic content under IAS 38.
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The Research/Development Split
The two-stage lifecycle of a website
StageIAS 38 labelOutcomeAccounting treatment
Planning stageResearchFeasibility assessment; choices between CMS, custom code, or third-party platform; graphic design decisionsExpensed as incurred – cannot be capitalised under IAS 38
Development stageDevelopmentConstruction of pages; coding functionality; integration with back-end systems; testing and QACapitalised when, and only when, all six IAS 38 recognition criteria are met
SIC-32 is explicit that the boundary between the two stages is NOT at the point of coding. Progress beyond planning does NOT automatically trigger capitalisation. Only when an entity can demonstrate ALL six IAS 38 recognition criteria (technical feasibility, intention to complete, ability to use or sell, how it will generate future economic benefits, availability of resources, and ability to measure the expenditure reliably) does capitalisation commence.
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Planning Stage Costs
What must be expensed
All costs incurred in the PLANNING stage are expensed as incurred. This includes:
EXPENSED COSTS
Feasibility studies for the website development Preliminary planning and evaluation of alternatives for the website Research (e.g. searching for the appropriate technology, evaluating different web approaches) Graphic design decisions that do not yet meet the recognition criteria Administrative overheads and other indirect costs attributable to the planning phase
The planning stage parallels IAS 38's "research" phase – nothing is certain enough about the entity's ability to complete and use the website to justify capitalisation.
Key principle
Expense recognition is the DEFAULT. There is a strong presumption against capitalising costs without clear evidence of each IAS 38 recognition criterion being met. Entities must document why planning costs do not meet those criteria – the burden of proof is on capitalisation, not on expensing.
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Development Stage Costs
What can be capitalised
Once the entity has moved into the DEVELOPMENT stage and ALL six IAS 38 recognition criteria are met, costs can be capitalised. This typically includes:
CAPITALISABLE COSTS
Costs of materials and services consumed in developing or obtaining access to current technologies Costs to create the website's software application directly attributable to bringing the asset to working condition Direct labour costs of employees engaged in development Payments to third-party developers for bespoke functionality
The boundary between development and maintenance
Ongoing maintenance – even if it enhances the website's functionality – is expensed NOT capitalised. Once the website is available for use, costs incurred to maintain or upgrade it are treated as repairs and maintenance, not as development costs, UNLESS they meet the recognition criteria as SEPARATE intangible assets and can be distinguished from the existing asset.
Example: Capitalisation vs. maintenance
An entity's website was capitalised at €500,000. In year 2, the entity spends €80,000 upgrading the checkout system to handle multi-currency payments. The upgrade extends functionality previously unavailable and provides future economic benefits.
If the upgrade costs meet IAS 38's recognition criteria – specifically technical feasibility, ability to complete, and probable future economic benefit – then the €80,000 is capitalised as a separate enhancement asset. If the upgrade is merely a security patch or cosmetic refresh, it must be expensed.
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Recognition Criteria
All six IAS 38 criteria must be met
CriterionApplication to website projects
Technical feasibilityThe entity can demonstrate that an intangible asset capable of generating future economic benefits exists – the website can be completed and made operational
Intention to completeManagement has demonstrated the intention to complete the website and use it for its intended purpose
Ability to use or sellThe website can be used internally or sold externally – for own-use sites, this means the entity can operate it to serve its needs
How it will generate future economic benefitsThe entity can demonstrate the mechanism – e.g. increased sales, reduced costs, improved customer service – through which the website will contribute to future cash flows
Availability of resourcesThe entity has the technical, financial, and other resources to complete development and use the site
Ability to measure expenditure reliablyThe costs of the development stage can be separately identified and measured – a critical criterion given the complexity of web development projects
Meeting ALL six criteria is a high bar. If ANY criterion is not met at a particular point, costs must continue to be expensed until all criteria are demonstrably satisfied. SIC-32 does not create a lower threshold for websites than IAS 38's general standard.
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Amortisation & Impairment
Post-recognition treatment
Once a website is recognised as an intangible asset, it is amortised over its useful economic life on a systematic basis. The useful life of a website is typically short – often 3-5 years – because technology evolves rapidly. However, each entity assesses the useful life based on its own expected usage and technological obsolescence.
SIC-32 CONFIRMS
Amortisation method (e.g. straight-line, units of production) should reflect the consumption pattern of the website's economic benefits IAS 36 impairment testing applies – the carrying amount of the website must not exceed its recoverable amount If the website is expected to generate benefits only for a limited period, the useful life should reflect that period
Technological obsolescence
Website-specific risks – such as browser incompatibility, security vulnerabilities, and changing user expectations – can cause a website to become obsolete more rapidly than a traditional software asset. Entities should assess indicators of impairment at each reporting date in line with IAS 36, including changes in the technological environment that could diminish the website's recoverable amount.
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Disclosure
What SIC-32 / IAS 38 requires
Whether the website is carried at cost or revalued amount (revaluation basis is permitted under IAS 38 for some intangible assets, though uncommon for websites) The gross carrying amount and accumulated amortisation at the beginning and end of the period Amortisation method, useful life, and amortisation charge for the period Gross amount of any additions, disposals, and impairment losses recognised in the period Reconciliation of the carrying amount from opening to closing balance
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Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
The boundary between planning stage and development stage – a subjective call that affects the size of capitalised vs. expensed amounts Whether an enhancement to an existing website meets IAS 38 recognition criteria as a separate asset Whether the website is an intangible asset for own use (IAS 38) or inventory (IAS 2)
SIGNIFICANT ESTIMATES
Useful economic life of the website in years – materially affects amortisation charge and asset carrying amount Remaining useful life at each reporting date for impairment testing Allocation of costs between planning expensed and capitalised development stages
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SIC-32 vs IFRS
Comparison – SIC-32 within the broader IFRS framework
AspectSIC-32 (IFRS)US GAAP (ASC 350)
Planning stage costsExpensed – cannot be capitalised as developmentGenerally similar – planning and preliminary design costs expensed
Development stage costsCapitalised IF AND ONLY IF all six IAS 38 recognition criteria are metSimilar criteria under ASC 350; some differences in application specifics
Post-completion upgradesExpensed unless they meet recognition criteria as separate assetsSimilar treatment – maintenance costs expensed; only enhancements with separately identifiable future benefits capitalised
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Statement Mapping
Where every SIC-32 event lands
EventStatement(s) affectedNotes
Planning stage costsSOPLExpensed as incurred – no asset recognition
Development stage costs – meeting IAS 38 criteriaSOFP SOPLCapitalised as intangible asset; amortised over useful life
Website available for use – amortisation beginsSOPLAmortisation over useful life from the date it is available for use
Post-completion upgradesSOFPCapitalised ONLY if they meet IAS 38 recognition criteria as a separate asset
Impairment loss recognisedSOPL SOFPIAS 36 impairment testing applied; loss recognised in profit or loss
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Related Standards
Cross-reference map
StandardConnection
IAS 38The parent standard SIC-32 applies directly to website development costs, including the research/development split and general recognition criteria
IAS 16Governs the hardware (servers, network equipment) used to host and operate the website – outside SIC-32's scope
IAS 2Applies instead where a website is developed for SALE to a customer, rather than for the entity's own use
Quick-reference glossary
Internally generated intangible asset
An intangible asset created by the entity itself through development activities rather than acquired from an external party – subject to specific recognition criteria under IAS 38, refined by SIC-32 for websites.
Research stage
The phase of web development before criteria for capitalisation are met – costs are expensed. SIC-32 identifies this as the planning stage for website projects.
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Glossary
Website (internally generated)
An internally generated intangible asset created through the development of a website for the entity's own use, subject to IAS 38's recognition criteria and SIC-32's research/development split.
Planning stage costs
Costs incurred in the research/planning phase of website development – feasibility studies, design exploration, and evaluation work that must be expensed under IAS 38/SIC-32.
Development stage costs
Costs incurred after planning when all IAS 38 recognition criteria are met – coding, integration, and testing costs that meet the capitalisation threshold.
Technological obsolescence
The risk that a website becomes outdated or functionally impaired due to changes in technology – a key impairment indicator under IAS 36 for web-based intangible assets.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Mar-2002
In March 2002 the International Accounting Standards Board issued SIC-32 Intangible Assets-Web Site Costs, which had originally been developed by the Standing Interpretations Committee of the International Accounting Standards Committee.
May-2014
IFRS 15 Revenue from Contracts with Customers
Minor consequential amendment to SIC-32
Jan-2016
IFRS 16 Leases
Minor consequential amendment to SIC-32
Mar-2018
Amendments to References to the Conceptual Framework in IFRS Standards and IFRS 18 Presentation and Disclosure in Financial Statements
Minor consequential amendment to SIC-32