Question

We have bought SAP system for accounting from a vendor and we need to pay annual license fees to maintain this software.

Kindly advise whether we can capitalise annual license fees?
 

Answer

If it is a software that is not necessary for the computer to run (i.e. is not an operating system itself), then the licenses are intangible asset. Thus you would capitalize all cost to purchase such a license in line with IAS 38.

However if they fees are payable just annually, then you need to expense them right in profit or loss, because in most cases the fee relates to the relevant year.