Software Costs

Question 1

Software costs have two categories, what are they?

Answer 1

Internally developed and cloud computing

Question 2

For software costs which are internally developed, when can costs be capitalized?

Answer 2

Internally developed software are expensed up to technological feasibility (the point at which the product could feasibly be sold to the market). Any point between technological feasibility and presenting the product to the market can be capitalized.

Question 3

How is software costs amortized or depreciated? (which method)

Answer 3

The greater of SL method or (Current Revenue/Total Expected Revenue) X Cost

Question 4

There are two criteria for a company to capitalize on software fees using the cloud, what are those 2 criteria?

Answer 4

1) The customer has the right to take possession of the software without using the cloud and not have a penalty or significant limitation as a result of not using the cloud.
2) Customer can run the software on their own hardware of the hardware of a third party