Are you wondering if website development is a fixed asset? If you're expecting your website to generate revenue in the years to come, then it can be considered a fixed asset and the cost of development should be included in your balance sheet. On the other hand, websites that provide general information about a company are not classified as fixed assets since they don't directly contribute to generating income. The creation of a completely new website or the addition of significant new functionality for that website will be included in capital expenditures. The cost incurred for creating, designing, developing, and programming a website will be treated as a capital asset.
It's also the time when the company can purchase all the hardware needed to support the website. These purchases will follow existing capitalization policies, will be included in the balance sheet and will be amortized. According to International Accounting Standards Board (through IAS 38 and SIC 3), the different stages of website creation should have a different accounting treatment. The initial planning stage is an expense and is included in the profit and loss account.
The creation of the website must be capitalized as an asset in the balance sheet. Any subsequent updates you make to the content of the website are considered an expense. Once you've confirmed that your website is a fixed asset, you can include all the costs of launching the website to determine the cost of the website that should be treated as a fixed asset. Typical maintenance costs would include updating web pages, correcting minor style or format problems, correcting errors or broken links, or making format changes consistent with font size, types and colors.
If you don't sell anything directly from your site, then you need to include the costs of developing your website in your profit and loss statement. Before you begin to determine the tax treatment of your website development costs, you should first determine what you use your website for. If it's for customers to buy things through it and make a profit with those items, then the tax treatment of your website development gets more complicated. It will treat the costs of creating a website in the same way as computer software if a company uses a third party to design, develop, create and program the website.
Once your website is launched, ongoing costs such as hosting, maintenance, and product updates cannot be capitalized as a fixed asset. Nonprofit organizations should carefully examine the costs of their websites and assign them to the appropriate stage of development to determine their appropriate accounting treatment. A completely new website or adding important new functionality requires an analysis of all costs involved in different stages of development. Depending on allocations for a particular year, this could result in full deduction of costs for developing your website. During this stage, non-profit organizations will incur costs to develop or purchase software, develop or acquire and customize database software, develop or acquire code for web applications, and integrate several other applications such as accounting software.
