Westpac has raised the threshold for software to be capitalised as an asset from $1 million to $20 million.

The bank said in an ASX filing [pdf] that it would also write-down the value of capitalised software and other intangible assets already on its books to the tune of $115 million.
The $115 million writedown is part of net impact of $282 million on the bank’s cash earnings for the first half of the financial year.
The overall impact was partially offset by valuation gains in the bank’s holdings of Coinbase (up $288 million) and Zip ($18 million).
On the change in software capitalisation policy, Westpac said it is “increasing the threshold before a project is capitalised to $20m (previously $1m).”
“This policy has been applied from October 1 2020 and will see the group expense a higher portion of its investment spending from first half 2021,” it said.
“The higher expense is not treated as a notable item.
“This change had no impact to the carrying value of capitalised software at September 30 2020.”
Software costs incurred by listed companies can be either expensed upfront or capitalised and amortised (gradually written off); the latter can allow a company to report lower expenses and therefore higher income.
As noted by the Australian National Audit Office (ANAO), “Software has considerable costs attached which, depending on their nature, are capitalised as an asset, or expensed.”
“It is important these costs are correctly accounted for to provide users of financial statements with accurate information on an entity's software assets and the costs of its operations,” ANAO said.
“Understanding the true value of software assets better enables entities to plan future investments to replace, extend or improve their software assets, in support of strategic and operational objectives.”
Westpac is not alone in raising the threshold for software capitalisation.
NAB similarly did so last year, saying the move would "uplift business accountability" for software-related expenses incurred on projects internally.
Westpac has been criticised in the past for the way it accounted for software-related expenses.
The bank will announce its first half results next week.