Accounting treatment

The board discussed the progress of finding suppliers for the new website. The board was reminded that in the previous meeting Azania had noted that with the growing trend of emerging universities, Utlwisisa is facing some pressure, as can be seen by the losses made each year. Therefore, Patsy suggested that their current website be updated with a fresher and more modern look to attract more students and donations.

The current website had been created by Thandeka, however, web design is not her specialty and with her current busy schedule, the board decided to request tenders from third-party service providers to assist with the design, development, implementation, and hosting of the new website. Azania reported that various quotes have now been obtained from external providers and the process of evaluating the providers’ experience, independence, external references, and services has begun. It was resolved at the meeting that the internal audit division would be requested to assist in this matter and that the new website should also host a section for the alumni to enquire about new courses and/or donate to less fortunate students.

It is envisaged that the selected external service provider will incur costs to investigate relevant techniques to enable the design of a suitable and compatible website with requisite functionality. The website will be developed using the selected provider’s own computer equipment, operated by its web design specialists, therefore reducing abnormal waste costs to a minimum. All the designing will take place at the leased premises rented out by the service provider. The website will undergo the necessary testing to ensure that it meets the required standards and offers the desired functionality. Azania reported that Utlwisisa has budgeted for the training of a newly recruited intern that will work on the website and for a small celebratory lunch once the new website is completed

write a memo to the CFO, discussing with reasons, the appropriate accounting treatment for the design and development of the new website.

● Your response should consider both the perspectives of the selected service provider and of Utlwisisa (Pty) Ltd.

● Your response should be limited to recognition and measurement only.

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