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To what extent can one consider a domain name and/or website to be an asset vs. liability?

Clearly the people who have websites that do make big profits off of them consider them to be valuable, intangible assets because of the opportunities to earn money and etc.

Not all websites make much money, and some people lose more on a website than they make (by renewing the domain; hosting costs; development costs; etc.). In such a general outlook, would a website and/or domain name be better seen, for the most part, as an asset/liability? How/why?

Ben Miller
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Schlickster
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2 Answers2

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This depends on your definitions of assets and liabilities.

The word "asset" has a fairly straight forward definition. Generally speaking, an asset in finance is something that you own/control that has economic value. The asset has value because it is generating income for you or because you expect that it will be worth something to someone in the future.

"Liability" is tougher to define, and depends on context. In accounting, a liability is a debt or obligation that is owed. It is essentially the opposite of an asset; where an asset represents something of value that you own, increasing your balance sheet, a liability is a value that you owe, decreasing your balance sheet.

In that sense, a website or domain name that you own is an asset, not a liability, because it is something you own that has some value. It is not a debt.

Many people use the word "liability" informally to refer to a bad asset: something that is losing value or is causing more in expenses than it is generating in income. (See definition #5 on Wiktionary.) With this definition, you might consider a website or a domain name a liability if it is losing money.

Alternatively, depending on your business, you might not consider it an asset or a liability, but an expense instead. An expense is a cost of doing business. For example, if your business is selling something, you might need a website to make that happen. The website isn't purchased as an investment, and it might not have any value apart from your business. It is simply a necessary expense for your business.

Ben Miller
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In an accounting position, a domain name would fall under an intangible asset. Copyrights and patents are intangible, while tangible assets would be buildings or land (also known as property, plant, and equipment).

Noting above, you can list it as an expense for personal reasons, but that would be poor classification. Tangible and intangible assets come with expenses such as legal fees and design. In these instances, you would expense the cost, or fee, but add back that value to the tangible or intangible as it would be considered maintenance.

Please read here for tax treatment of a domain name.

Please read here for what an intangible asset is.

Also read here on page 11 for more clarification by IFRS.
Liam
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