Deduction of software assets that are classified as intangible assets for accounting purposes for the purposes of Article 36(1), point (b), of Regulation (EU) No 575/2013

1. Software assets that are intangible assets as defined in Article 4(1), point (115), of Regulation (EU) No 575/2013 shall be deducted from Common Equity Tier 1 items in accordance with paragraphs 5 to 8 of this Article. The amount to be deducted shall be determined on the basis of the prudential accumulated amortisation calculated in accordance with paragraphs 2, 3 and 4 of this Article.

2. Institutions shall calculate the amount of the prudential accumulated amortisation of the software assets referred to in paragraph 1 by multiplying the amount obtained from the calculation referred in point (a) by the number of days referred to in point (b):

the amount at which the software asset has been initially recognised on the balance sheet of the institution under the applicable accounting framework, divided by the lower of:

the number of days of useful life of the software asset, as estimated for accounting purposes;

three years, expressed in days, starting from the date referred to in paragraph 3;

the number of days elapsed since the date referred to in paragraph 3, provided that this does not exceed the period referred in point (a) of this paragraph.

3. The prudential accumulated amortisation referred to in paragraph 1 shall be calculated starting from the date on which the software asset is available for use and begins to be amortised for accounting purposes.

4. By way of derogation from paragraph 3, where a software asset has been acquired from any undertaking, including a non-financial sector entity, that is part of the same group as the institution, the prudential accumulated amortisation referred to in paragraph 1 shall be calculated from the date on which that software asset began to be amortised under the applicable accounting framework on that undertaking’s balance sheet.

5. Institutions shall deduct from Common Equity Tier 1 items the amount resulting from the difference, if positive, between the amount in point (a) and the amount in point (b):

the prudential accumulated amortisation of a software asset calculated in accordance with paragraphs 2, 3 and 4;

the sum of the accumulated amortisation and any accumulated impairment losses of that software asset recognised on that institution’s balance sheet under the applicable accounting framework.

6. By way of derogation from paragraph 5, until the date on which the software asset is available for use and begins to be amortised for accounting purposes, institutions shall deduct from Common Equity Tier 1 items the full amount at which the software asset is recognised on that institution’s balance sheet under the applicable accounting framework.

7. The prudential amortisations and deductions set out in this Article shall be made separately for each software asset.

8. Institutions’ investments in maintaining, enhancing or upgrading existing software assets shall be treated as assets other than the related software assets, provided that those investments are recognised as an intangible asset on that institution’s balance sheet under the applicable accounting framework.

Without prejudice to paragraph 6, the prudential accumulated amortisation of those investments in maintaining, enhancing or upgrading existing software assets shall be calculated from the date on which they begin to be amortised under the applicable accounting framework.

The prudential accumulated amortisation of related existing software assets shall continue to be calculated from the date of their own initial amortisation for accounting purposes and until the end of the period of the prudential amortisation determined in accordance with point (a) of paragraph 2.’.

COMMISSION DELEGATED REGULATION (EU) 2020/2176 of 12 November 2020 amending Delegated Regulation (EU) No 241/2014 as regards the deduction of software assets from Common Equity Tier 1 items