US GAAP rules for software costs (external sale)

US GAAP- Computer costs and accounting treatment

All computer costs incurred in creating software product are R&D costs. All Research and development costs are expensed.

Technological feasability is an important criteria in determining whether the costs can be capitalized or expensed.

Technological feasability refers to the cost analysis  that is performed to determine the potential economic viability of a process or a technology. This also helps determines which is the best technology that has the highest likelihood of economic success.

Once technological feasability has been established, all costs upto the general release can be capitalized.

Any capitalized costs are then reported at the lower of cost & net realisable value. (Net realizable value is generally equal to the selling price of the inventory goods less the selling costs). Therefore, it is expected sales price less selling costs (repair and disposal costs).

 

 

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Posted In: Accounting

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