Tag Archives: asc

Costs of software to be sold, leased, or marketed, ASC 985

Accounting Rules about Software
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”

asc 350-40: Internal-Use Software
–> AICPA SOP 98-1
–> “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”

Two points on the timeline:
(A) When the technological feasibility is established
(B) When the product is available for general release to customers

Costs of software to be sold
1. Up to (A) –> expensed
2. After (A) up to (B) –> capitalized
3. After (B) –> expense

Costs of purchased software
1. Software that has alternative future use
–> capitalized
2. Software without alternative future use
–> treated same as internal development costs

Capitalized software costs
1. Amortized on a “product-by-product” basis
2. Amortization starts at (B)
3. Amortization amount is the higher of (1) or (2)
(1) straight-line method amortization
(2) amount based on the ratio of current revenue and total expected revenue

Impairment test
1. If (a) is less than (b), (b) is written down to (a)
(a) net realizable value of the product
(b) unamortized balance
2. The difference is recognized as an expense
3. Write-down is not reversed in subsequent periods

 

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Servicing Assets and Liabilities, ASC 860

Accounting for Servicing of Financial Assets
SFAS 156 amended SFAS 140 in March 2006
SFAS 140 replaced SFAS 125 in September 2000

SFAS 156, March 2006
“Accounting for Servicing of Financial Assets”
an amendment of FASB Statement No. 140

SFAS 140, September 2000
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”
a replacement of FASB Statement No. 125

SFAS 125, June 1996
” Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”

Amendments to SFAS 140 by SFAS 156 in March 2006
1. Initial measurement
Servicing Assets (SA) and Servicing Liabilities (SL) are
–> initially measured at fair value

2. Subsequent measurement
Before SFAS 156,
–> SA and SL are subsequently measured at amortized cost

SFAS 156 provides
–> a Fair Value Option for SA and SL

Entities have a choice of (A) or (B):
–> (A) Amortized cost
–> (B) Fair value

3. Separate presentation of SA and SL
–> subsequently measured at fair value

 

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Sale of Financial Assets, ASC 860

Accounting for Servicing of Financial Assets
SFAS 166 amended SFAS 140 in June 2009
SFAS 156 amended SFAS 140 in March 2006
SFAS 140 replaced SFAS 125 in September 2000

SFAS 166, June 2006
“Accounting for Transfers of Financial Assets”
an amendment o FASB Statement No. 140

SFAS 156, March 2006
“Accounting for Servicing of Financial Assets”
an amendment of FASB Statement No. 140

SFAS 140, September 2000
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”
a replacement of FASB Statement No. 125

SFAS 125, June 1996
” Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”

Amendments to SFAS 140 by SFAS 166 in June 2009
1. The concept of Qualifying Special Purpose Entities (QSPE) was removed
–> Paragraphs 34 – 46 were deleted.

2. Financial components approach was modified

The application of sale accounting is limited to (A), (B), (C)
(A) transfer of an entire financial asset
(B) transfer of a group of entire financial assets
(C) transfer of a participating interest in an entire financial asset

Paragraph 8B of SFAS 140 defines the “participating interest”

3. The conditions to determine whether the control was surrendered
–> were amended for clarification
–> Paragraph 9 of SFAS 140

4. Additional disclosures
–> Paragraphs 16B – 16D were added

 

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