![]() GAAP Financial Reporting Guide by AccountingStudy.com Accounting Study.com TM U.S. GAAP Financial Reporting Guide,,,,,,, Section 3330: Accounting for Software 1. Software revenue 985-605: Software Revenue Recognition --> AICPA SOP 97-2, Software Revenue Recognition 2. Costs of internal-use software 350-40: Internal-Use Software --> AICPA SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use 3. Costs of software to be sold 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 4. Two points on the timeline: (A) When the technological feasibility is established (B) When the product is available for general release to customers 5. The guidance for accounting for internal-use software in the FASB’s Accounting Standards Codification (ASC) 350-40, Accounting for Internal-Use Software. Costs of software to be sold (1) Up to (A) --> expensed (2) After (A) up to (B) --> capitalized (3) After (B) --> expense 6. Costs of purchased software (1) Software that has alternative future use --> capitalized (2) Software without alternative future use --> treated same as internal development costs 7. Capitalized software costs (1) Amortized on a 'product-by-product' basis (2) Amortization starts at (B) (3) Amortization amount is the higher of (a) or (b) (a) straight-line method amortization (b) amount based on the ratio of current revenue and total expected revenue 8. 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 9. GAAP, Codification of Accounting Standards, ASC - Accounting Standards Codification by FASB U.S. GAAP Codification of Accounting Standards U.S.
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