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In: Accounting

Capitalized costs incurred to develop software for internal use is amortized using which method of amortization.What...

Capitalized costs incurred to develop software for internal use is amortized using which method of amortization.What is the ASC?

Which amortization method is recommended?

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Expert Solution

The costs of software developed internally and for internal use only, the method to ammortize the cost is through the useful life of the asset. The amount to be ammortized will be after deducting the residual value if any. Stright line should be used over the useful life of the asset. IF the useful life is not known, determine it by analyzing the asset over years.

ASC is the Accounting Standard Codification is the source of US GAAP i.e. Generally Accepted Accounting Principles laid down by FASB. These are applied to Non-Government entities. This codification introduced an organised structure which made it easy for users to access and be updated about the requirements to the standards about accounting.

Technological feasibility of a computer software product is established when the entity has completed there planning. designing, coding and testing that are required to meet its design specifications. These costs are subject to rules regardless of these costs were internally or externally generated. In waterfall, amortization begins since the project is completed. In agile environment, companies amortize cost every month with release of each sprint.

Due to dynamic nature of software development and improvements, agile method is more recommended than waterfall.

ekkarill92 answered 2 years ago
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