Website development costs can be capitalized on, but only if additional features are added. This includes the design of the site with backgrounds, fonts, frames and buttons. 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 amortized. If you believe that your website is primarily intended for advertising, you can currently deduct the internal software development costs of the website as an ordinary and necessary business expense. Depending on your accounting method, you can deduct the total cost of the website in the year it was paid or accrued (depending on your accounting method), or you can choose to treat your website as software and amortize your deductions over three years. In the event that a taxpayer pays an interior designer to purchase furniture and accessories, and to make recommendations on a new office design, the costs paid to the interior designer should be included in the cost of furniture and accessories.
When it comes to website development costs, it is important to understand what can and cannot be capitalized. It is possible to capitalize on updates and improvements to the website, but only if additional features are added. The creation of an entirely new website or the creation of significant new functionality for that website will be included in capital expenditures. For accounting purposes, entities that have been within the scope of FRS 10 (the financial reporting standard for goodwill and intangible assets) should capitalize on website costs to the extent that they include application and infrastructure development costs, design costs and content costs; and only if they are within the scope of application.
