UK Accounting for internally generated intangible assets when using agile methodology

[Steven66]

Hi,

I was wondering if anybody had experience of capitalising internally generated intangible assets (e.g. websites, apps etc.) when the team developing the asset is using an agile product development methodology rather than traditional waterfall method. By this I mean that the people working on the 'product' may be working on multiple projects each month and also there isn't a traditional straight line product lifecycle development process of Initiation-Research-Design-Development-Testing-Implementation, these often happen concurrently based on releases/app updates etc. rather than one after another. The key challenges I see are:
(1) How people book there time to the various projects (based on actual time per project, which is very time consuming or apportioned between projects?)
(2) How you differentiate between initiation/Research stages (that would be deemed 'research' under accounting rules so revenue expenditure) and development/testing etc. (which could be deemed capital if all the criteria are met)?

Assume international accounting standards are applicable e.g. IAS 38 (the most applicable)

Thanks in advance.

 

[Steve-LevelUp]

I use a similar style system in which our development work is done in Sprints. The staff track their time (we use the fingers on keyboards) approach while they are programming. They record their time based on which sprint is being worked on.

Every month, we calculate the total hours by person spent on each sprint and then determine the hourly rate (plus burden) for each staff to determine a total monthly cost per sprint.

This amount is then capitalized (we have a payroll capital expense account where this entry is recorded) We amortize each sprint over 3 years straight line.

We have a fairly large development team, so typically people spent most of their time on a single sprint. Sometimes, one person works on 2 or 3 sprints, but not very often. Time tracking is the challenge here, but good sprint tracking is good practice anyway, given you need to have good point management of development resources.

I hope that helps with what you are looking for.

Regards.

 

[bklynboy]

My company does something very similar to Steve-LevelUp except we track in Clarity as the system. It can be done with a spreadsheet tool I imagine that captures work hours for each indivudal, work perrformed (we use drop down categories to group activities whether capitalized or not) and salaey + benefits of that person to ratio the amount by.