Subsequent expenditure on software

Accounting for software can be challenging since it differs from classic intangible assets like patents or brand names.

Specifically IAS 38.20 states: The nature of intangible assets is such that, in many cases, there are no additions to such an asset or replacements of part of it. Accordingly, most subsequent expenditures are likely to maintain the expected future economic benefits embodied in an existing intangible asset rather than meet the definition of an intangible asset and the recognition criteria in this Standard. ...

Since this is clearly not the case with software, I agree that the subsequent expenditure can be capitalized.

As to the amortization (semantically, tangible assets are depreciated, intangible assets are amortized), IAS 38.97 states: The depreciable amount of an intangible asset with a finite useful life shall be allocated on a systematic basis over its useful life.

Thus if the update merely extends the useful life of the SW (maintains its functionality), then yes, the original SW should be amortized over its useful life 2012 to 2016 while the update of its useful life 2017 to 2021 (assuming it’s also for 5 years).  The update should not be amortized from 2016 when it was acquired because it is only “available for use” after the original SW license has expired.

And, practically speaking, this is preferable as otherwise the two amortizations would overlap and 2016 would have double.