We can agree to disagree but this is the basis for Gentracks capitalisation of development, directly from their financial statements
5.4 INTANGIBLE ASSETS
CAPITALISED DEVELOPMENT
Costs that are directly associated with the development of software are recognised as intangible assets where the following criteria are met:
• it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use or sell it;
• there is an ability to use or sell the software product;
• it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
• the expenditure attributable to the software product during its development can be reliably measured.
Software development costs that meet the above criteria are capitalised. Other development expenditure that does not meet the above criteria is
recognised as an expense as incurred. Development costs previously recognised as expenses are not recognised as assets in a subsequent period.
Software development costs recognised as assets are amortised over their estimated useful lives.
We can debate this till the cows come home, but they have a track record of capitalising expenditure and that has future economic benefit. If the software does not meet the conditions described in their financial statements then they are working on elements that are either rework, bug fixes, or maintenance on the existing product, or gambling on functionality they are not certain will have an economic benefit, or prove as much. Hence my view on under investment. They are saying only $1m will have a future economic benefit based on their own criteria, that is significant underinvestment given the amount they spend on R&D or they have a product set that requires significant maintenance.
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