Accounting for websites is not a simple operation. Depending on the characteristics of the transaction (acquisition or internal realization) and the website (shop window, e-commerce site …), the accounting treatment to be applied is different.
This article will allow you to understand the accounting of expenses related to the acquisition or development of websites. To do this, we will split the study into several parts so that you can position yourself in the situation that concerns you.
1. Accounting of websites: the different cases
Before entering the accounting methods, it is necessary to be able to position the site in question on these 2 points: is it a site developed in-house or acquired? Is this an active or passive website?
A company that wishes to obtain a website can:
- Either to buy a website, by asking a professional to realize it or by buying an existing site,
- Or develop it internally.
Then, the site in question can be either active or passive.
An active website is a site that registers orders and / or is part of the company’s information system or business system. For example, an online sales site is an active website.
A passive website is a simple site that presents only the company but does not participate in its information system or trading system. These include showcase sites.
2. The acquisition of a website
The websites acquired by the company must be immobilized:
- That it has the objective of using them in a sustainable manner in the course of its activity,
- That it is a project with serious prospects of technical success and commercial profitability,
- And that the company has the resources to implement it.
The accounting entry is as follows:
- The account 401 Suppliers is credited,
- The accounts are debited:
- 205 “Concessions and similar rights, patents, licenses, trademarks, processes, software, rights and similar values” or a sub-account provided for websites,
- And 44562 “VAT deductible on fixed assets”.
If the capitalization criteria are not met, expenses related to this acquisition are recognized as an expense.
3. The in-house realization of a website
Accounting rules for internally created websites are more complex. Here is the general principle to apply:
- Expenses incurred by the company during the research phase are mandatory as expenses;
- Expenses incurred by the company during the development phase may be either:
- Recognized as expenses in the accounts corresponding to the various expenses,
- Or recognized as an asset if certain conditions are met (see below) in an account 205. This is the preferred method .
To immobilize the expenses incurred by the company during the development phase, the following conditions must be met:
- It is an active website,
- The company intends to complete the development of the website and this must be technically feasible,
- The company has the resources necessary for the completion of the website and for its use or sale,
- The company has the ability and intent to use or sell the website,
- The website should normally generate future economic benefits,
- And the company must be able to reliably evaluate the expenses related to the development of the website.
4. Amortization of websites
Websites that are capitalized or depreciated must be depreciated over their expected useful life, usually between 3 and 5 years.
Fiscally, it is no longer possible to apply an exceptional amortization over 12 months (this option was discarded by the Finance Law for 2017 and applies to all Internet sites acquired during the financial years opened since 1 January 2017). For more information on this practice that was applicable for acquisitions of websites made before January 1, 2017, you can read this article: the derogatory depreciation, optional application.