If software is an integral part of the hardware, it can be accounted for as a tangible asset. If an asset combines tangible and intangible components, it is at the discretion of the company to determine which component predominates. Software is not an intangible asset in itself if it is identified as an integral part of the related hardware and is therefore not clearly identifiable and separable but is part of the tangible component (accounting as property, plant and equipment).
The introduction of prudential amortisation will initially involve considerable implementation effort for the institutions. This should be kept as low as possible, see also questions 4 and 7.
We consider a prudential amortisation period of two years for regulatory purposes to be too short and not appropriate.
As EBA has already indicated in the consultation document, a short amortisation period has a negative impact on large software and IT infrastructure investments that have a longer useful life. Such investments could contribute to improving the competitiveness and resilience of the EU banking sector so that a short amortisation period would contradict EBA's objectives in this context. It should also be noted that the introduction of a short amortisation period has a negative impact on banks that have made a large part of their software investments early on. They should rather be encouraged. On the contrary, the planned amortisation schedule penalises banks that have invested in their software at an early stage. After reviewing our inventory of software assets, we consider a useful life for regulatory purposes of more than 2 years to be appropriate and still sufficiently conservative.
We prefer option B. Prudential amortisation should start at the same time as the software asset is amortised for accounting purposes. In existing systems, only parallel treatment between regulatory and accounting amortisation can be implemented. No data are available yet for a different regulatory amortisation process.
A deviation between the regulatory and accounting start date would involve a high effort for the institutions and would unnecessarily increase the complexity of the exemption rule. In addition, we advocate waiving the capital deduction until the software is put into operation. The recoverability of the assets prior to putting them into operation will be confirmed by the auditor as part of his audit certificate.
We are in favour of making the exemption rule for avoiding capital deduction an option for institutions.