Helping clients meet their business challenges begins with an in-depth understanding of the industries in which they work. That’s why KPMG LLP established its industry-driven structure. In fact, KPMG LLP was the first of the Big Four firms to organize itself along the same industry lines as clients.

How We Work

We bring together passionate problem-solvers, innovative technologies, and full-service capabilities to create opportunity with every insight.

Learn more

Careers & Culture

What is culture? Culture is how we do things around here. It is the combination of a predominant mindset, actions (both big and small) that we all commit to every day, and the underlying processes, programs and systems supporting how work gets done.

Learn more

FASB changes course on software cost accounting

Defining Issues | March 2024

Board abandons ‘single model’ in favor of targeted improvements to existing US GAAP.

At its March 20, 2024, meeting the Board reached a tentative decision to focus its future efforts on making targeted improvements to modernize the internal use software accounting model in ASC 350-40 and enhancing disclosures on software developments costs for investors.


  • All entities that develop software for either internal or external use

Relevant dates

  • On June 22, 2022, the FASB decided to add a project on the accounting for software costs to its technical agenda. No technical decisions about the project path were made.
  • On April 5, 2023, the FASB directed its staff to abandon further consideration of a dual model that would account for internal- and external-use software costs differently. Instead, the Board directed the staff to focus its efforts on developing a single accounting model for both.
  • On September 20, 2023, the FASB reached tentative decisions about when to recognize internal- and external-use software development costs under a new single software cost accounting model. The Board also directed its staff to perform additional investor outreach and to concurrently explore an alternative that would only make targeted improvements to the existing software guidance.
  • On March 20, 2024, the FASB discussed investor outreach that generally indicated investors do not see a need for significant changes to companies’ software development cost capitalization. Therefore, the Board decided to re-focus its software cost project principally on (1) targeted improvements to modernize ASC 350-40 for agile software development and (2) enhancing software cost disclosures.

Key Impacts:


  • The project addresses the recognition, measurement, presentation and disclosure of software costs in the financial statements.
  • The project objectives are to modernize the software cost accounting guidance in US GAAP and enhance the transparency of entities’ accounting for those costs.

Key project decisions to date:

Project direction

  • The Board tentatively decided to abandon a larger re-write of software cost accounting in US GAAP that would have implemented a new single accounting model for internal- and external-use software costs. Instead, the Board will focus on making only targeted improvements to the internal-use software guidance in ASC 350-40 and enhancing disclosures about software development costs for investors. Investor input that increased capitalization of software development costs--  a likely result for many entities under the single model previously being considered -  was not desirable drove this decision.
  • The Board considered but rejected any targeted improvements to the existing external-use software cost guidance in ASC 985-20 or expanding the project scope to include software acquired in a business combination.

Targeted improvements to ASC 350-40

The Board directed the staff to further explore the following potential amendments:

  • Specify that software development costs incurred before the resolution of unresolved high-risk development issues related to a software project are R&D costs.
  • Eliminate the guidance that requires companies to identify and differentiate between costs incurred during the preliminary and application development stages for software projects that use agile or similar non-linear development methodologies. Some Board members raised concerns about potentially forcing companies to differentiate their accounting based on their software development approach (e.g. Agile versus Waterfall).
  • Require entities to consider any unresolved development uncertainties when evaluating whether it is probable a software project will be completed (only after which capitalization can begin).

Disclosure enhancements

  • The Board directed the staff to explore potential enhancements to existing disclosures for software development costs, which would include thoroughly evaluating what is required under US GAAP today and what additional information about software development costs and activities investors would find useful.

Next Steps

The Board directed the staff to continue research and outreach on the targeted improvement amendments and enhanced disclosure requirements.

Related projects

Board members observed that efforts to date on the software costs project, including efforts to develop the now-abandoned single software cost accounting model, would continue to inform the Board in relation to its broader intangible assets project that remains on the research agenda.

Explore more

Meet our team

Image of Scott Muir
Scott Muir
Partner, Dept. of Professional Practice, KPMG US
Image of P.K. Barot
P.K. Barot
Partner, Dept. of Professional Practice, KPMG US

Accounting Research Online

Access our accounting research website for additional resources for your financial reporting needs.

Thank you!

Thank you for contacting KPMG. We will respond to you as soon as possible.

Contact KPMG

Use this form to submit general inquiries to KPMG. We will respond to you as soon as possible.

By submitting, you agree that KPMG LLP may process any personal information you provide pursuant to KPMG LLP's Privacy Statement.

An error occurred. Please contact customer support.

Job seekers

Visit our careers section or search our jobs database.

Submit RFP

Use the RFP submission form to detail the services KPMG can help assist you with.

Office locations

International hotline

You can confidentially report concerns to the KPMG International hotline

Press contacts

Do you need to speak with our Press Office? Here's how to get in touch.