A blurred background. In focus are the sleeves of a mustard jumper and a pair of hands holding a mobile phone in the left palm while the right thumb and fore finger touch the phone screen

Some of this gap will be represented by intangibles not recognised in those balance sheets, but which could be even under the existing IFRS. This study is one of three that ACCA has commissioned to look at into that. Previous ones have covered R&D costs and exploration costs for extractive companies, this looks at software development costs.


Software development costs whether outsourced or in-house could be expected to be a material issue for most companies, especially as the digital economy has grown.

The financial statements of all listed companies using IFRS were looked at over the period 2015 to 2019 ending up with a sample of over 40,000 accounts from 39 countries. About half of companies did not refer to software costs either as an expense or capitalised as an asset. Of the half that did 64% capitalised a software asset. Both of those measures are disappointing but markedly better than we found with R&D costs. 

There are strong and intriguing variations in these scores between countries. Over 80% of companies in China, Japan, Taiwan and Korea referred to software development in their accounts, compared to less than 20% of companies in Mexico, Malaysia and Singapore for example. 

Across the whole sample, software development was more likely to be recognised as an asset by more dynamic companies – for instance those that are more international, more acquisitive and more leveraged.

Despite talk of digitalisation, in the period to 2019 software has not grown as a proportion of total assets in these companies. The report not only gives a picture of the current position on reporting software, but also includes some good practice examples of disclosure.

The findings have implications for IASB, supporting further the case for a revision of the standard on intangibles (IAS38), but also for those relying on accounts – IFRS may be global standards but this case shows like others that their implementation is not uniform across the world.