Report phase

Audit defence for a capitalised token asset

Report, procedure

Audit defence is assembling, before the auditor asks, the evidence for every judgement in the asset: that the amount is measured, that the phase boundary is dated, that the useful life and method reflect the pattern of benefit IAS 38 §98, and that the impairment position is documented IAS 36 §12. A closed challenge is one where the paragraph and its evidence are already on the file.

What the auditor will challenge

Four judgements attract the most scrutiny. Whether the amount is really directly attributable and measured rather than allocated. Whether spend was development-phase, not research or run. Whether the useful life is defensible for an asset that could be obsolete within a year. And whether the impairment review was performed and evidenced. Each maps to a paragraph, and each can be closed in advance.

The defence, step by step

Reconcile the amount to the ledger. Trace the capitalised figure to the aggregated development-phase token-ledger rows, so the amount is measured, not asserted.
Evidence the phase boundary. Show the dated feasibility assessment and phase markers that mark where research became capitalisable development.
Justify useful life and method. Attach the obsolescence evidence behind the useful life and the pattern-of-benefit rationale behind the method.
Document the impairment review. Retain the indicator review and any recoverable-amount workings, naming the deprecation or supersession event.

The documentation package

The token-ledger extract behind the capitalised amount, re-summable to the posting.
The feasibility assessment and phase-marker evidence for the crossing point.
The amortisation-policy memo, with the useful-life and method justifications.
The impairment indicator review and any recoverable-amount workings.
The reconciliation and disclosure note, tying to all of the above.

Never overstate certainty

Where a judgement is genuinely finely balanced, the file should say so and set out why the chosen position is reasonable, rather than present it as the only possible answer. An auditor trusts a preparer who marks the judgement honestly more than one who claims certainty the evidence does not support IAS 38 §97.