Domain Acquisitions - Accounting Treatment

[Ashman]

Start of a new financial year and we all start processing our "stats" for the previous year.

It's my first financial year that I will be processing domain acquisitions and without consulting with an accountant what would be the accounting treatment for domain acquisitions?

I know that hand registrations would be expensed but how about those larger purchases, are they also expensed or transferred to the balance sheet?

If they are transferred to the balance sheet at cost are they depreciated or appreciated? Given that there is no formal valuation method for domains appreciating them would be a challenge.

 

[acheeva]

Start of a new financial year and we all start processing our "stats" for the previous year.

It's my first financial year that I will be processing domain acquisitions and without consulting with an accountant what would be the accounting treatment for domain acquisitions?

I know that hand registrations would be expensed but how about those larger purchases, are they also expensed or transferred to the balance sheet?

If they are transferred to the balance sheet at cost are they depreciated or appreciated? Given that there is no formal valuation method for domains appreciating them would be a challenge.

This is my opinion only & not advice

The tax treatment will be based on individual facts

If you class yourself as a trader (buy / sell) the the domains would be stock; if you class yourself as a developer (buy / earn) then they would be a depreciating asset (part of the overall cost of the website)

The tax provisions generally deal in real cost & there are no provisions to recognize appreciation prior to sale. The exception is the stock valuation provisions (traders); however these cannot be applied in isolation (i.e. each class of stock needs to be valued the same)

Off course you can always prepare accounts according to the accounting rules & legitimately adjust them for tax purposes; so long as the substance of the transactions does not change (i.e. you cannot call yourself a trader for one purpose & not another)