Weaver Limited is a company that is a distributor of
Weaver Limited is a company that is a distributor of hard-to-find computer supplies such as hardware parts and cables. It sells and ships products all over the world. Recently the board of directors approved the plan and a budget for the company to design its own website. The website has two sections. One is for general information and can be accessed by anyone. On this part of the site, the company has information about what it does, and pictures of all the products sold. The other part of the website is only accessible by logging in. There, customers are given passwords to enter the site and can place their orders, which are then reviewed by the order clerks and sent on to shipping. The IT manager has been put in charge of managing the website project, keeping track and approving all the costs incurred. The company has incurred the following costs to develop the site: the IT manager's salary for the six months required to supervise the project; legal fees to register the domain name; consulting costs for a feasibility study; purchase of the hardware; software developers to develop the code for the application, installation, and testing of the software; graphic artist to design the layout and colour for the web pages; photographers to take pictures of the products to be shown on the site; staff time to upload all the information to the site, including the company and product descriptions; and the data required to place an order, including prices, data entry screens, and shipping options. Finally, the company has incurred costs to train the employees on using the software. Ongoing costs include updating product prices and content, adding new functions, and backing up the data.
You are an external auditor and have been hired by Weaver to explain how these costs should be reported. Using IAS 38 and SIC 32 - Intangible Assets-Web Site Costs (an Interpretation under International Financial Reporting Standards that is accessible via an Internet search), discuss the treatment of these costs, referring to the general principles in IAS 38 to support your analysis. Explain how the company must report costs incurred once the website is operating.
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