Statements of Position

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Description

This Statement of Position (SOP) provides guidance on accounting for the costs of computer software developed or obtained for internal use. The SOP requires the following: 1. Computer software meeting the characteristics specified in this SOP is internal-use software. 2. Except as stated in the following sentence, external direct costs of materials and services consumed in developing or obtaining internal-use computer software; payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use computer software project (to the extent of the time spent directly on the project); and interest costs incurred in developing computer software for internal use should be capitalized as a long-lived asset. Computer software costs that are research and development should be expensed as they are incurred in accordance with the provisions of Financial Accounting Standards Board (FASB) Statement No. 2, Accounting for Research and Development Costs. 3. Training costs included in the purchase price of computer software should be expensed as incurred. Maintenance fees included in the purchase price should be recognized in expense over the maintenance period. 4. Impairment should be recognized and measured in accordance with the provisions of FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. 5. The costs of computer software developed or obtained for internal use that are capitalized should be amortized over the estimated useful life of the software in a systematic and rational manner. 6. Proceeds received from the sale of computer software developed or obtained for internal use should be applied against the carrying amount of that software. No profit should be recognized until aggregate proceeds from sales exceed the carrying amount of the software. The SOP identifies characteristics and provides examples to assist in determining when computer software is for internal use. The SOP applies to all nongovernmental entities and is effective for financial statements for fiscal years beginning after December 15, 1997. Earlier application is encouraged in fiscal years for which financial statements have not been issued.

ISBN

ed96-12-17t

Publication Date

1996

Relational Format

Book

Keywords

Computer software -- Costs -- Accounting -- Standards -- United States; Computer software -- Development -- Costs -- Accounting -- Standards -- United States

Disciplines

Accounting | Taxation

Comments

Originally published by: American Institute of Certified Public Accountants; Copyright and permission to reprint held by: American Institute of Certified Public Accountants; Exposure draft (American Institute of Certified Public Accountants), 1996, Dec. 17

Proposed statement of position : Accounting for the costs of computer software developed or obtained for internal use;Accounting for the costs of computer software developed or obtained for internal use

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