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.

Author: Nikorisar Shakara
Country: Honduras
Language: English (Spanish)
Genre: Video
Published (Last): 11 August 2018
Pages: 72
PDF File Size: 16.3 Mb
ePub File Size: 16.88 Mb
ISBN: 123-5-94026-360-8
Downloads: 40736
Price: Free* [*Free Regsitration Required]
Uploader: Fegis

A significant change is made or will be made to the software program.

The SOP requires the following: Frederick Gill Senior Technical Manager. The treatment of the costs of the multiple elements specified here is consistent with those provisions. Accounting for Costs of Computer Software Developed. Significant cost overruns d.

AcSEC further concluded that costs capitalized before the application of this SOP should be subject to the impairment and amortization provisions in this SOP, but should not otherwise be adjusted to an amount that would have been capitalized had this SOP been applied.

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

Make strategic decisions to allocate resources between alternative projects at a given point in time. This SOP provides guidance on when costs incurred for internal-use computer software are and are not capitalized. SOP is not the standard that applies because you are not building Internal Software for internal use. Moreover, certain users commented that they believe that overhead costs had little relationship to the value of software.

An entity’s past practices related to selling software may help determine whether the software is for internal use or is subject to a plan to be marketed externally. Purchased or leased computer software used in research and development activities where the software does not have alternative future uses b.

Training costs and data conversion costs, except as noted in paragraph 21, should be expensed as incurred. Select a consultant to assist in the development or installation of the software. When it is no longer probable n7 that the computer software project will be completed and placed in service, no further costs should be capitalized, and guidance in paragraphs 34 and 35 on impairment should be applied to existing balances.

Some respondents to the exposure draft believe that costs of computer software developed or obtained for internal use should be expensed as incurred. Accordingly, AcSEC’s criteria for determining capitalizable upgrades and enhancements focus on providing additional functionality.


AcSEC believes that entities develop or obtain internaluse computer software often for the same endpurposes that they develop or obtain other assets. In many situations, prior to clearance, the FASB will propose suggestions, many of which are included in the documents.

What is the best SaaS solution for stock option accounting? By contrast, software for internal use, though it may be used in developing a product, is not part of or included in the actual product or service sold.

Business Exchange Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business. Examples are to reduce costs, operate more efficiently, improve internal controls, service customers better, and gain competitive advantages. In some cases, the purchase price includes multiple elements, such as training for the software, maintenance fees for routine maintenance work to be performed by the third party, data conversion costs, reengincering costs, and rights to future upgrades and enhancements.

Otherwise, you will end up with an unwieldy asset that you will have to figure out how to write off.

However, certain representatives of the financial statement user community oppose capitalization of internal costs incurred to develop or obtain internaluse software. Some enterprises that develop or purchase software for internal use currently expense those costs as incurred.

The Appendix of this SOP includes examples of computer software considered to be for internal use and thus not “part of a product or process.

Its IT expenditures are primarily for the purpose of housing and refreshing a database that changes every month.

Probable does not require absolute certainty. At that time, the FASB considered expanding the scope of that project to include costs incurred for the development of computer software for internal use.

Upgrades and enhancements normally require new software specifications and may also require a change to all or part of the existing software specifications. Explore alternative means of achieving specified performance requirements.

Some proponents of capitalization ssop internal-use software observe that paragraph 24 of APB Opinion 17, Intangible Assets, requires that entities capitalize acquired intangible assets. Determine the performance requirements that is, what it is that they need the software to do and systems requirements for the computer software project it has proposed to so.

Please email content proformative. The allocation should be based on objective evidence of fair value of the elements in the contract, not necessarily separate prices stated within the contract for each clement. In addition, it states that, “costs incurred to purchase or lease computer software developed by others are not research and development costs under FASB Statement No.


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.

AcSEC acknowledges, however, that certain costs of internally developed software will be expensed as research and development whereas a portion of the research and development costs incurred by a third party will be capitalized by the purchasing entity because the third party’s research and development costs are implicitly part of the acquisition price of the software.

They believe that capitalization would result in assets that have arbitrary amortization xop. The software is acquired, internally developed, or modified solely to meet the entity’s internal needs.

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 eop functionally dependent are ready for their intended use.

Amortization and impairment of previously capitalized costs in accordance with the provisions of this SOP should result in an acceptable level of comparability and understandability.

U.S. GAAP Codification of Accounting Standards Guide by

AcSEC considered that costing systems for inventory and plant construction activities, while sometimes complex, were necessary costs given the routine activities that such systems support. AcSEC believes that the presence of a substantive plan to market software externally before or during software development indicates an intent to sell, lease, or otherwise market software, which requires accounting prescribed by FASB Statement No.

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.

The rebuttable presumption is that such uncompleted software has a fair value of zero. AcSEC believes that the costs of developing the information that would be necessary to determine the amounts that would be capitalized if this SOP were to be applied retroactively would exceed the benefits retroactive application might offer and that such a retroactive determination should not be made.

But I’d truly appreciate critiques and suggestions if my thought process is flawed.