U.S. GAAP Codification of Accounting Standards

U.S. GAAP Accounting Standards
Codification Topic 350-40: Internal-Use Software

Codification Topic 350-40
Internal-Use Software

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"

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"

asc 985-605: 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

Preliminary project stage
--> Costs are expensed as incurred

Application development stage
--> Costs to develop internal-use software
--> 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

Capitalized software costs
--> are amortized on a "straight line" basis
--> over the estimated useful life
and 
--> should be reviewed for impairment