Westpac tweaks technology accounting

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Westpac tweaks technology accounting

Big IT spend likely next year.

Westpac has altered how it calculates its technology investment spend, and expects to now report a $505 million drop in capitalised software in its upcoming full-year results.

After last month announcing it would boost its tech investment spend over the next three years to $1.3 billion as part of a new technology strategy, Westpac said it later decided to review its accounting policies in relation to IT investment. 

The review was also prompted by "rapid changes in technology and evolving regulatory requirements", it said today.

As a result of the review, the bank will now directly expense more technology project costs than it has in the past.

It will also move to an accelerated amortisation model for capitalised software - which will affect most of its existing software assets that have a useful life of more than three years - and will additionally write off the capitalised cost of regulatory programs where the legal requirements have changed.

The changes mean its capitalised software balance will drop by $505 million pre-tax in its full year 2015 results, to be reported in early November. The $505 million had previously been reported as an expense.

It also means its total technology investment expenses for the fiscal year 2016 will be higher, thanks to the impact of directly expensing more project costs.

A small increase in software amortisation expenses is also likely in the next fiscal year, Westpac said, because the accelerated amortisation for long-life software will offset the lower amortisation from the reduction in capitalised software.

Westpac advised that its upcoming results would include some "large infrequent items" that should be excluded from cash earnings, such as the $354 million post-tax impact of the reduced capitalised software balance.

In its half year results earlier this year, the bank said technology projects accounted for 25 percent of its total $458 million investment spend for the six month period.

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