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U.S. GAAP
Financial Accounting Review

Section 3350: Internal-use Software

[U.S. GAAP Codification Topic]
350-40 Internal-use software

[U.S. GAAP before the Codification]
350-40 Internal-use software
AICPA SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use

1. Three stages to develop software
(1) Preliminary project stage
(2) Application development stage
(3) Post-implementation/operation stage

2. Preliminary project stage
--> Costs are expensed as incurred

3. Application development stage
--> Costs to develop internal-use software
--> during the application development stage
--> are capitalized

4. Post-implementation/operation stage
--> Costs are expensed as incurred

5. Upgrades and enhancements to software
--> Costs may be capitalized
--> if "additional functionality" is added

6. Capitalized software costs
--> are amortized on a "straight line" basis
--> over the estimated useful life
and
--> should be reviewed for impairment