Accounting Rules about Software
asc 350-40: Internal-Use Software
–> AICPA SOP 98-1
–> “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”
–> AICPA SOP 98-1
–> “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”
asc 985-20: Costs of Software to Be Sold, Leased, or Marketed
–> SFAS 86, August 1985
–> “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed”
–> SFAS 86, August 1985
–> “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed”
asc 985-605: Software Revenue Recognition
–> AICPA SOP 97-2
–> “Software Revenue Recognition”
–> AICPA SOP 97-2
–> “Software Revenue Recognition”
Accounting for the Costs of Software for Internal Use
asc 350-40 based on AICPA SOP 98-1
Three stages to develop software
1. Preliminary project stage
2. Application development stage
3. Post-implementation/operation stage
2. Application development stage
3. Post-implementation/operation stage
Preliminary project stage
–> Costs are expensed as incurred
Application development stage
–> Costs to develop internal-use software
–> during the application development stage
–> are capitalized
–> during the application development stage
–> are capitalized
Post-implementation/operation stage
–> Costs are expensed as incurred
Upgrades and enhancements to software
–> Costs may be capitalized
–> if “additional functionality” is added
–> if “additional functionality” is added
Capitalized software costs
–> are amortized on a “straight line” basis
–> over the estimated useful life
and
–> should be reviewed for impairment
–> over the estimated useful life
and
–> should be reviewed for impairment