Handbook: Software and website costs

Key impacts

In 2015 and 2018, the FASB added guidance to US GAAP on customers’ accounting for hosting arrangements. In 2015, the FASB added guidance in Subtopic 350-40 (internal-use software) to determine whether hosting arrangements include a software license or are, instead, service contracts (i.e. cloud computing arrangements). In 2018, the FASB further amended Subtopic 350-40 to add guidance on customers’ accounting for implementation costs incurred in cloud computing arrangements.

In addition, in 2016, the FASB amended Subtopic 350-40 to clarify that acquired internal-use software licenses, perpetual or term, are intangible assets to be recognized, and that if an acquired software license will be paid for over time, the customer should recognize a liability for those fees it owes in the future.

Organized in a Q&A format, this book is intended to help you effectively and efficiently apply Subtopics 350-40, 350-50 and 985-20 on internal-use software, website development costs and external-use software, respectively.

We give examples and observations to explain key concepts. And while most of the guidance in these subtopics has not been revised recently, advances in technology, changes to how software is sold/purchased and the evolution/proliferation of agile software development have given rise to application issues not envisioned when that guidance was issued. We address many of those issues herein.