When to create an asset and capitalise payments?

Valetta

A company is installing a complete new ERP system, to include renewal of all hardware and new software, licences etc.

The rollout will take up to 6 months, crossing over a Year End.

Payments will be made on a regular basis as the work progresses.

At what stage in the process should the asset be created and depreciation started?

My thoughts would be at the end of the whole project, with interim payments being held as prepayments.

Thanks for any imput.

Gard1

I would capitalise as per invoices received.

whatawaster

Is any part of the new system functional at the year end?

Valetta

whatawaster wrote: »

Is any part of the new system functional at the year end?

I wouldn't say functional. The system won't go live until the last moment after training etc.

However, the company will technically own all the equipment and software.

whatawaster

Valetta wrote: »

I wouldn't say functional. The system won't go live until the last moment after training etc.

However, the company will technically own all the equipment and software.

I'd say then to capitalise each invoice as received but not to start depreciating until it goes live and starts producing economic benefit.

Valetta

whatawaster wrote: »

I'd say then to capitalise each invoice as received but not to start depreciating until it goes live and starts producing economic benefit.

Thanks.

That actually makes perfect sense.