how should our company document accountability for softwares purchased by the company ?

Question

we are a government agency. when we purchase tangible properties we establish accountability through a document signed by the accountable officer. should we do the same for softwares which is an intellectual property right and not tangible but nevertheless expensive?

Answer 1

Yes indeed. You probably have more documentation with expensive software cos there's usually a long process of tenders, evaluation and board approvals before the purchase is actually made. You shd make sure the officer approves the purchase and/or the payment on the relevant voucher.

In case you're interested in accounting for such expensive software, I've attached the relevant paras from the FRS on Intangible Assets.

Intangible Assets with Finite Useful Lives

Amortisation Period and Amortisation Method
97. The depreciable amount of an intangible asset with a finite useful life shall be allocated on a systematic basis over its useful life. Amortisation shall begin when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Amortisation shall cease at the earlier of the date that the asset is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with FRS 105 Noncurrent Assets Held for Sale and Discontinued Operations and the date that the asset is derecognised. The amortisation method used shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. If that
pattern cannot be determined reliably, the straight-line method shall be used. The amortisation charge for each period shall be recognised in profit or loss unless this or
another Standard permits or requires it to be included in the carrying amount of another asset.
98. A variety of amortisation methods can be used to allocate the depreciable amount of an asset on a systematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the unit of production method. The method used is selectedon the basis of the expected pattern of consumption of the expected future economic benefits embodied in the asset and is applied consistently from period to period, unless there is a change in the expected pattern of consumption of those future economic benefits. There is rarely, if ever, persuasive evidence to support an amortisation method for intangible assets with finite useful lives that results in a lower amount of accumulated amortisation than under the straight-line method.
99. Amortisation is usually recognised in profit or loss. However, sometimes the future economic benefits embodied in an asset are absorbed in producing other assets. In this case, the amortisation charge constitutes part of the cost of the other asset and is included in its carrying amount. For example, the amortisation of intangible assets used in a production process is included in the carrying amount of inventories (see FRS 2 Inventories).