The FASB issued has an Exposure Draft that aims to modernize the accounting requirements for the capitalization of internal-use software costs. The Exposure Draft would remove all references to software project stages and, alternatively, would specify that an entity must start capitalizing software costs when both of the following have occurred:
Additionally, the Exposure Draft includes a provision stipulating that if there is significant development uncertainty then no software development costs are to be capitalized until such development uncertainty has been resolved. The Exposure Draft also requires that cash flows from capitalized software costs, other than implementation costs of a hosting arrangement, be classified as investing activities and are to be separately presented from other investing cash outflows.
The Exposure Draft would permit an entity to apply the guidance on either a prospective or retrospective basis. The effective date and whether early adoption would be permitted have not yet been determined. In addition, the FASB is soliciting feedback on potential private company considerations. Comments on this Exposure Draft are due by January 27, 2025.
The full text of the Exposure Draft can be found here.
Published: 12/01/2024
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