FASB ASC 985 – Software

The Financial Accounting Standards Board (FASB) released Accounting Standards Codification 985 (ASC 985) to address most of the significant accounting situations that may arise with computer software.

These are generally broken down into the following sub-topics:

  • Cost of software to be sold, leased, or marketed
  • Inventory
  • Intangibles such as Goodwill
  • Revenue recognition
  • Cost of sales and services
  • Research and Development
  • Nonmonetary transactions

As an accountant, dealing with computer software in these different categories is different than dealing with other types of products and projects mostly due to the attempts laid out to clarify the boundaries of certain gray areas. Since software is a relatively new type of asset (compare to things such as land, buildings, etc. which have been accounted a certain way for years) it is important that standards be set consciously rather than allowing the industry to establish them in ways that may not be as transparent as investors would like.

For more in depth information on this and other FASB ASC topics, check out the following books.

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