To obtain a copy of SOP (product no. JA), contact the AICPA order department at () NOTE Statements of Position on accounting. SOP is a Statement of Position, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, issued by the American Institute of. SOP – Since its arrival ten years ago, the AICPA’s SOP , “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” has.

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SOP 98-1 — Accounting for the Costs of Computer Software

AcSEC decided not to specify a maximum amortization period because each entity is better able to determine an appropriate useful life. Internal-Use Computer Software Marketed AcSEC concluded that there are broader implications to this request and that if further guidance on impairment is to be provided, it should be provided by the FASB.

Entities, at the start of both kinds of projects, often expect that existing technology will allow the entity to complete projects that will provide future benefits.

Entities should allocate the cost among all individual clements. The significance of information, especially quantitative information, depends to a great extent on the user’s ability to relate it to some benchmark. The document is cleared if at least five of the seven FASB members do not object to AcSEC undertaking the project, issuing the proposed exposure draft or, after considering the input received by AcSEC as a result of the issuance of the exposure draft, issuing the final document.

Aicap between enterprises and consistency dop the application of methods over time increases the informational value of comparisons of relative economic opportunities or performance.

Explore alternative means of achieving specified performance requirements. To obtain a copy of SOP product no. Internal costs incurred for maintenance should be expensed as incurred.

Computer software to be sold, leased, or otherwise marketed includes software that is part of a product or process to be sold to a customer and should be accounted for under FASB Statement No.

Stages of Computer Software Development Technologies are introduced in the market-place, so that management intends to obtain the third-party software or software products instead of completing the internally developed software f. If the functionality of a module is entirely dependent on the completion of other modules, amortization of that module should begin when both that module and the other modules upon which it is functionally dependent are ready for their intended use. Capitalization should cease no later than the point at which a computer software project is substantially complete and ready for its intended use.


Each customer’s interface is unique and cannot be “reused” for another customer, so these system development costs have no lasting asset value and I expense them as incurred. Therefore, software development costs incurred during this stage should be capitalized. Internal and external costs incurred to develop internal-use computer software during the application development stage should be capitalized. Overhead costs associated with a particular internal-use software development project could be even more complex to measure than production overhead and, as they most often represent an allocation among capitalizable and expensed functions, may not be sufficiently reliable.

Select a consultant to assist in the development or installation of the software. This SOP provides guidance on when costs incurred for internal-use computer software are and are not capitalized. AcSEC also recognizes that costs of computer software developed or obtained for internal use reported as assets may be subsequently written-off due to lack of adequate funding or lack of management’s continued commitment to a project.

For example, computer hardware or furniture used in back-office operations are indirectly related to future benefits.

SOP 98-5 brings uniformity to reporting start-up costs.

What is the best SaaS solution for stock option accounting? My instincts run along the lines you mention but I have lacked FASB standards to quote, so yes, I need to do more homework and will jump into that.

Paragraph 24 also states that “costs of developing, maintaining, or restoring intangible assets which are not specifically identifiable, have indeterminate lives, or are inherent in a continuing business and related to an enterprise as a whole -such as goodwill — should be deducted from income when incurred. However, AcSEC believes that this is also true for some other assets.

Examples of authorization include the execution of a contract with a third party to develop the software, approval of expenditures related to internal development, or a commitment to obtain the software from a third party. AcSEC believes that training costs are not software development costs and should be expensed as they are incurred because entities do not control the continued employment of the trained employees, are not able to identify the specific future period benefitted, and amortization periods would be arbitrary.

Subsequent proceeds should be recognized in revenue as earned. The staff of the Securities and Exchange Commission SEC and other interested parties have requested that standard setters develop authoritative guidance to eliminate the inconsistencies in practice.


Quickbooks Enterprise and deferred revenue. Business segment or unit to which the software relates is unprofitable or has been or will be discontinued Amortization AcSEC believes that the marketplace inherently considers the technological capabilities, including software, of many entities when it establishes market values. AcSEC considered all of these views.

Interest costs incurred while developing internal-use computer software Interest should be capitalized in accordance with the provisions of FASB Statement No. In the spirit of minimizing less relevant disclosures, AcSEC decided not to include any new disclosures in the exposure draft though entities are required to follow disclosure requirements set forth in existing authoritative literature.

September 17, Mr. The FASB stated that it recognized that at that time the majority of entities expensed all costs of developing software for internal use, and it was not convinced that the predominant practice was improper. Otherwise the data remains untouched. My client charges a nonrefundable “system integration fee” at contract signing to cover the expense of its side of the integration. All internally developed internal-use computer software n2 including software developed by third parties, for example, programmer consultants if 1 the software is a pilot project that is, software of a nature similar to a pilot plant as noted in paragraph 9 h of FASB Statement No.

Without the data, my client has no business proposition. This SOP provides guidance on accounting for computer software that consists of more than one component or module.

SOP — Accounting for the Costs of Computer Software

Information has been obtained indicating that the costs of internally developed software will significantly exceed the cost of comparable third-party software or software products, so that management intends to obtain the third-party software or software products instead of completing the internally developed software e. AcSEC decided soo to do so because it believes an entity can best determine the materiality of internal-use computer software costs in its individual circumstances.

AcSEC believes that as part of these activities an entity will determine whether the needed technology exists. Its IT expenditures are primarily for the purpose of housing and refreshing a database that changes every month.

Accordingly, AcSEC’s criteria for determining capitalizable upgrades and enhancements focus on providing additional functionality.

Therefore, AcSEC believes that data conversion costs, as discussed in paragraph 22, should be expensed as they are incurred.