At Tanner LLC we work with a lot of technology companies and the subject software capitalization is always point of discussion. It is US GAAP, but we understand most investors just consider it a complication in the P&L and its hard to track and implement. The FASB board agreed this week to explore ways to simplify this GAAP, which would be welcomed. Below is a short summary of what they released. The Board decided to pursue targeted improvements to Subtopic 350-40, Intangibles—Goodwill and Other—Internal-Use Software. Specifically, the Board decided to: 1. Specify that the costs of software that has unresolved high-risk development issues would be accounted for as research and development (R&D) expenses in accordance with Subtopic 730-10, Research and Development—Overall 2. Clarify the starting capitalization threshold for nonlinear software development, including: a. Remove the requirement for an entity to evaluate the preliminary project stage and application development stage when determining the starting point for capitalization b. Require that an entity consider significant unresolved development uncertainties if it is unclear that it is probable that a project will be completed and the software will be used to perform the function intended. The Board decided not to further pursue a single model for recognition and measurement of software costs, which the Board had discussed previously, and decided not to make targeted improvements for recognition and measurement to Subtopic 985-20, Software—Costs of Software to Be Sold, Leased, or Marketed.
Klint Lewis, CPA’s Post
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