Accounting for and Disclosure of Software Costs
Last updated on January 26, 2023. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Sections updated on the date above are indicated with an asterisk *)
On June 22, 2022, the Board discussed the pre-agenda research, including stakeholder feedback, on the accounting for and disclosure of software costs. The Board decided to add a project to its technical agenda to (1) modernize the accounting for software costs and (2) enhance the transparency about an entity’s software costs. The Board decided that the scope of the project is the recognition, measurement, presentation, and disclosure of costs to internally develop or acquire software, which encompasses all of the software costs currently subject to the guidance in Subtopics 350-40, Intangibles—Goodwill and Other—Internal-Use Software, and 985-20, Software—Costs of Software to Be Sold, Leased, or Marketed, for all entities.
The Board discussed the recent feedback received from a wide variety of stakeholders on various models.
The Board directed the staff to further research the initial development cost model, including ways to increase the operability and consistency of the application of that model. The initial development cost model would require that all direct software development costs and software enhancement costs be capitalized from the point at which it is probable that (1) the software project will be completed and (2) the software will be used to perform the function intended. Software development costs incurred after the software is substantially complete and ready for its intended use and ongoing maintenance costs would be expensed as incurred.
The Board also directed the staff to further research a dual model. That model would require that certain software costs be expensed as incurred, while other software costs would be accounted for under the initial development cost model. The Board directed the staff to research alternatives to delineate between which software costs should be expensed and which should be capitalized.
The Board directed the staff to complete the research on recognition and measurement for the initial development cost and dual model before further considering presentation and disclosure improvements. The Board decided not to further pursue the ongoing development cost model or the expense all model.
Last updated on January 26, 2023. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.
(Sections updated on the date above are indicated with an asterisk *)
Objective:
The objectives of this project are to (1) modernize the accounting for software costs and (2) enhance the transparency about an entity’s software costs.Background:
On December 15, 2021, in response to feedback received on the June 2021 Invitation to Comment, Agenda Consultation, FASB Chair Rich Jones added software costs to the research agenda as part of the Accounting for and Disclosure of Intangibles research project.On June 22, 2022, the Board discussed the pre-agenda research, including stakeholder feedback, on the accounting for and disclosure of software costs. The Board decided to add a project to its technical agenda to (1) modernize the accounting for software costs and (2) enhance the transparency about an entity’s software costs. The Board decided that the scope of the project is the recognition, measurement, presentation, and disclosure of costs to internally develop or acquire software, which encompasses all of the software costs currently subject to the guidance in Subtopics 350-40, Intangibles—Goodwill and Other—Internal-Use Software, and 985-20, Software—Costs of Software to Be Sold, Leased, or Marketed, for all entities.
Exposure Draft(s):
There are no exposure documents at this time.
There are no media releases or educational materials at this time.
Decisions Reached at Last Meeting (January 18, 2023):
The Board discussed the recent feedback received from a wide variety of stakeholders on various models.
The Board directed the staff to further research the initial development cost model, including ways to increase the operability and consistency of the application of that model. The initial development cost model would require that all direct software development costs and software enhancement costs be capitalized from the point at which it is probable that (1) the software project will be completed and (2) the software will be used to perform the function intended. Software development costs incurred after the software is substantially complete and ready for its intended use and ongoing maintenance costs would be expensed as incurred.
The Board also directed the staff to further research a dual model. That model would require that certain software costs be expensed as incurred, while other software costs would be accounted for under the initial development cost model. The Board directed the staff to research alternatives to delineate between which software costs should be expensed and which should be capitalized.
The Board directed the staff to complete the research on recognition and measurement for the initial development cost and dual model before further considering presentation and disclosure improvements. The Board decided not to further pursue the ongoing development cost model or the expense all model.
The Board meeting minutes, handouts, and videos are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.
The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
The following are links to the minutes for each meeting. To view Board meetings and handouts from the past 90 days, click here.
| January 18, 2023* | Board Meeting—The Board directed the staff to further research the initial development cost model and the dual model. |
| June 22, 2022 | Board Meeting—The Board added a project to its technical agenda to (1) modernize the accounting for software costs and (2) enhance the transparency about an entity’s software costs. |
| April 13, 2022 | Board Meeting—The Board discussed the pre-agenda research performed to date, including stakeholder feedback received on software costs in response to the June 2021 Invitation to Comment, Agenda Consultation. |
The staff plans to further develop the initial development cost model and the dual model for discussion at a future Board meeting.
Aarika Friend
Senior Project Manager
afriend@fasb.org
Ashley Tisckos
Project Manager
atisckos@fasb.org
P.K. Barot
Practice Fellow
pkbarot@fasb.org
Emerson Porter
Postgraduate Technical Assistant
eporter@fasb.org
Corey Girard
Postgraduate Technical Assistant
cgirard@fasb.org
Senior Project Manager
afriend@fasb.org
Ashley Tisckos
Project Manager
atisckos@fasb.org
P.K. Barot
Practice Fellow
pkbarot@fasb.org
Emerson Porter
Postgraduate Technical Assistant
eporter@fasb.org
Corey Girard
Postgraduate Technical Assistant
cgirard@fasb.org
The staff has prepared this summary for information purposes only. Any Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.