For the novices out there like myself, I think this is the line showing the capitalised development cost

Apologies if I'm digging an old update, but I'm posting this for my own learning reference and everyone else hopefully.

Find it interesting that software development can be recognised like this.

There's more interesting notes in the auditor report.

Yes, you're right @edgescape - that is where capitalised development costs get shown. A couple of points though. One is that 'intangibles' covers all manner of evils. Goodwill acquired in a business combination is, for instance, an intangible asset. Sometimes it gets shown on the balance sheet as a separate line item, but sometimes it doesn't and you have to go into the Notes to see the breakdown. In this case, though, I think it's fair to assume the line you have highlighted are capitalised development costs.

It's fairly standard practice for companies to (a) capitalise a portion of these costs, and (b) show this as an investing activity in the cash flow statement. There are exceptions though. Some companies adopt a fairly 'conservative' policy of expensing all these costs as they occur (GLH is currently doing so).

A rough rule of thumb is cash flows from investing activities represents spend that is likely to produce benefits in multiple future years. When you incur that type of spend the accounting standards suggest that you should capitalise these costs, and then amortise over time. Auditors will generally argue the strict letter of the law and say you should be capitalising. But for those companies that want the simplicity of expensing the costs and showing them as cash flows from operating activities, there are ways to argue your case (e.g. insufficient ability to estimate when the benefit will accrue etc.).

When I'm calculating Free Cash Flow I will generally deduct intangible spend (and PP&E and leases) so it becomes a moot point where it gets shown.

@Noddy74 what you say is absolutely correct, however, there is possibly a query about management's intention in carrying out this policy. the banks ran up huge capitalised software, then surprise surprise wrote it off as abnormal years later. therefore overstated previous earnings. i get weary of people doing this especially when STI or capital raisings are in the firing line, sometimes it is benign TNE?? maybe/hopefully

The thing to really look out for is when a company is capitalising development costs but also is frequently taking impairment expenses on that asset. Australia is relatively loose on allowing development costs to be capitalised. It's very uncommon in the US because it is so prone to fudging to make EBITDA look better. That rules around capitalising development costs are that you have to have a viable product that is likely to deliver "future economic benefits" to the company and you have a clear sight to getting the product to market. There is probably too much grey.