Tag Archives: asc 350

Website Development Costs, ASC 350

Website Development Costs
EITF Issue No. 00-2
“Accounting for Web Site Development Costs”

AICPA SOP 98-1
“Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”

Activities to develop websites
1. Planning stage
2. Development stage
(1) Infrastructure development stage
(2) Application development stage
(3) Graphics development stage
(4) Content development stage
3. Operating stage

Planning stage costs
–> expensed

Internet domain name costs
–> capitalized

Development stage costs
–> apply the rules of AICPA SOP 98-1

Operating stage costs
–> apply the rules of AICPA SOP 98-1

Rules of 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

 

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Internal-Use Software, ASC 350

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

 

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Intangibles Other than Goodwill, ASC 350

Intangible Assets
–> Type 1: Intangible assets with “finite” useful life
–> Type 2: Intangible assets with “indefinite” useful life

   Intangible assets with “finite” useful life
–> amortized over useful life

   Intangible assets with “indefinite” useful life
–> not amortized

Impairment Loss
All intangible assets
–> tested for impairment
–> impaired if (a) < (b)
(a) carrying amount
(b) fair value
–> impairment loss = (b) – (a)

   “Reversal” of impairment loss is not allowed.
[asc 350-30-35-14, 350-30-35-20]

 

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