CANBERRA: Commonwealth Bank of Australia has sold for $439 million its remaining stake in Visa, the payments facilitator originally owned by global banks, after an internal review led the company to reduce the value of some of its software faster than scheduled. CBA told the ASX on Monday morning that the “rapidly changing technology environment” had prompted the bank to review the value “of certain capitalised software assets, principally relating to digital and direct banking channels”. This review had “resulted in a one-off acceleration of amortisation” totalling $275 million after tax. This means CBA believes the lifespan of some of its digital banking software is shorter than initially envisioned.
The charge will be taken “above the line”. The total value of CBA’s capitalised software is just over $2.3 billion, according to the bank’s 2016 annual report. However, the impact on cash earnings will be minimal, because the amount of the charge from accelerating the amortisation will be almost offset by the profit to be gained from the sale of CBA’s stake in Visa.
CBA said the sale of the rest of its Visa stake, which it gained as part of Visa’s float on the New York Stock Exchange in 2008, would deliver CBA an after-tax profit of $278 million. The proceeds of both the sale of the Visa stake and the software write-down would be reported as a one-off item for the half-year ended December 31, CBA said.
Under accounting rules, costs associated with development of software are assessed against their future benefits and are capitalised as an asset on the balance sheet, where the software is reported as an intangible asset. The value of the assets are then amortised over time and expensed through the profit and loss statement. Some Australian banks have faced pressure from the market in recent years over the accounting treatment of software investments made “below the line”. In September last year, Westpac said it had written off $354 million of software below the line – meaning it did not show up in the cash earnings – but it rejected claims that management bonuses were boosted as a result.
