This website uses cookies to ensure you have the best experience. Learn more

Capitalizing The Costs Of Developing A Software Program For Sale

1272 words - 5 pages

In order to gain a better understanding of both the software industry and the applicable guidelines for capitalizing software, some outside research into the industry and FASB standards was completed. This research was complied as a part of the risk assessment portion of the audit process (Whittington & Pany, 2012). The issue of capitalizing the costs of developing a software program for sale is a complicated issue. This is due in part to the fact that the nature of technology is constantly changing so clear procedures regulating when to write off a software system vary according to the pace of technological changes within the industry.
Therefore, while a company is developing software, they should report the incurred creative costs to a research and development account (Warfield, Weygandt, & Kieso, 2007). Once the software product has reached a point where it is feasibly considered a technological product the costing can be adjusted to begin capitalizing the costs (Warfield, Weygandt, & Kieso). As established in FASB Statement No. 2, any costs incurred in the developing, creating, testing, and so forth of software products will be charged to the research and development expense account; however any adjustments to the software for upgrades and any costs to market the product would not be included in the research and development expense account (Accounting-Financial-Tax.com, 2012). This is because by the point the product is ready to be marketed or needs to be upgraded to meet new technological standards, the feasibility of the product has been established and therefore the product should be capitalized (Accounting-Financial-Tax.com). If however, after meeting the feasibility requirements, there is substantial risk associated with the product development, the costs assigned to the product should continue to be charged to the research and development expense account until the product is more stable and ready to market (Accounting-Financial-Tax.com).
Amortizing costs and reporting costs further complicate this issue. Amortization must be recorded at the higher of one of two approaches. Companies can utilize the straight-line approach which spreads costs over the life of the asset or the percent of revenue approach which amortizes costs based on the ratio of current revenues versus the anticipated future revenues for the product (Warfield, Weygandt, & Kieso, 2007). Because the software industry is volatile and FASB standards are conservative in nature, capitalized costs should be reported at the lower of book value or net realizable value (Warfield, Weygandt, & Kieso). Obviously, with the complexities and intricacies of this industry audit issues are certain to arise.
Major Audit Issues
Evidently, due to the difficulty of documenting exactly when a product passes from an unfeasible to feasible status, potential issues develop in the auditing process. For instance, the feasibility can vary depending on the existence of a...

Find Another Essay On Capitalizing the costs of developing a software program for sale

Program Balance for Developing and Implementing a Comprehensive Developmental School Counseling Program

1271 words - 6 pages Program Balance The ASCA National Model and the Texas Model both emphasize the importance of program balance when developing and implementing a comprehensive, developmental school counseling program (ASCA, 2012; Texas Counseling Association, 2004). Program balance is important as a counselor should spend 80 percent of his/her day working with and for students either in a direct or indirect capacity. A written program can assist counselors in

Steps in Developing a Training Program

860 words - 3 pages A quality training program used by the trainers usually covers wide range of objectives. The following four basic training steps are generally used by Trainers in order to achieve the objectives set for a training session. All 4 of these steps are equally obligatory for any training plan to be successful and efficient (Sarkis, 2000)Step 1: Training Needs Analysis.This step identifies actions to validate an investment in suggested training. The

A Literary Analysis of the Solutions Used in the Two Texts, Shooting an Elephant, and No Witchcraft for Sale

877 words - 4 pages couldn’t say anything; although after the incident happened, I had the choice of either calling the police or not. In relation, there are two texts in this section that deal with people that have to make a choice on making a solution to a problem. In the text, Shooting an Elephant, by George Orwell, the speaker is faced with the decision to shoot and kill a rampaging elephant. In the text, No Witchcraft for Sale, by Doris Lessing, the character

Reasoning In The Issues For The Costs Of Textbooks

746 words - 3 pages People have seen and despise the prices for used and brand new textbooks. There are many websites, stores, and companies that sell textbooks at a biased price. The books being sold are variety to depend on the dealer rather than optimizing to society’s opinion, costs must be decided depending on the quality of the textbook. Stores and companies need to open choices looking at publicity views: when the original price of a book costs $54.44

The benefits and costs of outsourcing for America

3280 words - 13 pages known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it. (Smith, 1991).It is possible to achieve high-quality systems at a lower price through economics of scale, better management of hardware, lower labor costs and better software licenses. Since the wages and rent of the workforce in outsourcing

The Total Quality Program for a Computer

1079 words - 4 pages The Total Quality Program for a Computernamecollege / courseinstructordateAbstractThe Total Quality Program for a Computer is an exploration of the steps involved in launching a new computer to targeted audiences with a focus on the business and management practices involved. An examination of consumer input, management, employees, suppliers, and distribution intermediaries' processes used in development of the product focusing on planning

Accounting for the Cost of Software Programs at AdCom Games Develop a Product Costing System

1757 words - 7 pages C) Suggested Future Changes for Costing System and Product Development Procedures As a new company the costs for each product have not become consistent yet. Using 2003 as an outline, AdCom should create an estimate of costs each quarter and/or year for each product it currently has and any they plan on developing in the future. These estimates of hours and rates will keep the product costing system up to date, and allow it to produce more

The Costs for Free Music

1416 words - 6 pages the world. Within a year, millions of people were trading songs from a simple download. It didn't take long for Metallica to take legal action against Napster and to ban users from access. After the RIAA joined in with many other groups and bands filing numerous infringement suits, Napster was forced to shut down in 2001 (Mason). This opened the door; in the next few years, P2P networks and file sharing across the world grew exponentially

The Costs of Smoking

1740 words - 7 pages The Costs of Smoking Humans are the only animals to inhale smoke intentionally. Humans have found many ways to inhale smoke, but there are no known benefits. Cigarettes, the most popular method of inhalation, appear deceptively basic, just a paper cylinder containing processed tobacco. In fact, they are highly designed to deliver a steady dose of nicotine, from the three main types of tobacco, virginia, burley and

The Costs of Racism

1242 words - 5 pages The Costs of Racism The Merriam-Webster Online Dictionary defines racism as “a belief that race is the primary determinant of human traits and capacities and that racial differences produce an inherent superiority of a particular race.” Racism is one of the deepest stains on the pages of American history. What began as feelings among whites of being superior to blacks turned into possibly the worst phenomenon the United States

The Social Responsibility of a Software Engineer

3088 words - 12 pages The Social Responsibility of a Software Engineer Abstraction: The social responsibility is one of important responsibilities defined by ACM in its ethic codes for software engineer. Compare to other responsibilities, social responsibility is more remote and ambiguous. When a software engineer obtained the privilege to practice his/her right from the society, he/she is required to take corresponding responsibilities. But the definition of

Similar Essays

Developing A Training Program Essay

1240 words - 5 pages policies such as hours of work, holidays, vacation, insurance, and other benefits 6. Overview of the orientation and competency assessment process. B. The program should be assessed for proper content and delivery, as well as how successful the orientation program is. Creating a baseline will give information about what has to be accomplished and will allow an educator to evaluate the success of the efforts. Use focus group research, qualitative

Developing The Strategic Plan For Civista Medical Center As They Implement A Cardiac Rehabilitation Program

1001 words - 4 pages Financial planning is a key element in the implementation of the strategic plan to ensure organizational objectives are met. The objective of this paper is to continue to develop the overall strategic plan for Civista Mecial Center as they plan to implement a cardiac rehabilitation program. The projected budget will be discuseed along with financial assumptions and capital expenditure planning. The budget will be summarized and the projected

Current Treatment Strategies For Parkinson's Disease; Are The Costs To The Community Of Developing New Treatment Strategies Justified?

1293 words - 5 pages Discuss current treatment strategies for Parkinson's disease. How can the patient's quality of life be preserved? Are costs to the community of developing these new treatment strategies justified? Justify your answer.Parkinson's is a neurodegenerative disease, which is caused by a loss of dopamine producing cells in the brain . The disease is progressive and debilitating and is outwardly manifested in tremors, stiffness and rigidity

A Review Of Nirvana For Sale

886 words - 4 pages Nirvana for Sale by Rachelle M. Scott is an anthropological investigation into the intersection of wealth and piety in Thailand Theravada Buddhism. Through ethnographic methods, the book seeks to describe this relationship in a historically situated context. Thus, the book is concerned with cultural praxis within the context of religious discourses about wealth and piety. As a piece of ethnography, the work is competent, but draws little