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Accounting for Software as A Service (SaaS)

A decision in 2021 by the IFRS Interpretations Committee could potentially change the way Schools and Colleges recognise and account for software configuration and customisation costs. In light of the decision, Schools and Colleges that have historically recognised software configuration and customisation costs as intangible assets will need to review these assets and consider any adjustments required while preparing their 2021 financial statements.

Unless configuration and customisation service costs meet the definition of an intangible asset, these should be expensed either at the time the service is provided or, where it is not distinct from other charges, across the term of the supply contract, which is often one year. One of the key tests in determining whether configuration and customisation costs are likely to meet the criteria of an intangible asset is whether the School or College can demonstrate that the nature and output of the configuration and customisation costs results in an identifiable asset that is controlled to obtain future economic benefit. In the case of cloud-based software programs, the software provider usually retains this control.

Historically capitalised configuration and customisation costs need to be reviewed to confirm they meet the definition of an intangible asset and the recognition criteria for an intangible asset in accordance with AASB 38 Intangible Assets. Where it is determined not to be the case, an adjustment will be required for the year ended 31 December 2021 to remove these from the School or College’s assets.


Do you require any assistance assessing intangible assets carried, or determining the appropriate treatment of configuration and customisation costs incurred?

Please get in touch with McConachie Stedman Director, Ben Horner, at