Accounting for Software - Internal Use and External Sales (Course Id 1980)

• Who is this course for?
  This course is designed for CPAs, controllers, finance professionals, and accountants responsible for preparing, reviewing, or auditing financial statements that involve internally developed or sold software.

• What is this course about or what problem does this course solve?
  It addresses the accounting and disclosure rules under ASC 350-40 and ASC 985-20, clarifying how to differentiate between internal-use and marketable software, when to capitalize costs, and how to apply GAAP-compliant treatment for amortization and disclosures.

• How can the knowledge from this course be used?
  Learners can apply the appropriate accounting standards to determine software classification, accurately record capitalized costs, assess technological feasibility, calculate amortization, and meet disclosure requirements in financial reporting.

• Why is this course important to a CPA, Accountant, or IRS Enrolled Agent?
  Proper software accounting ensures compliance with FASB standards, reduces audit risk, and impacts financial results. Professionals need to understand these distinctions to support reliable financial reporting and audit preparation.

• When is this course relevant or timely?
  Updated in March 2024, the course reflects the most current interpretation of ASC 350-40 and ASC 985-20, aligning with ongoing changes in how businesses develop and deliver software, especially in SaaS and tech-forward industries.

• How is a course like this consumed or used?
  This is a NASBA QAS-approved text-based self-study course delivered online. Participants read the materials, answer review questions, and must pass a final exam with a 70% score to earn 2.5 CPE credits.

This course provides an overview of the accounting for software, including both internal-use software as well as software that will be sold to third parties.  The accounting, reporting, and disclosure requirements related to software depends on the nature of the software, and whether it will be used internally by an entity or will be marketed to its customers.  For internal-use software, the guidance is prescribed by ASC Topic 350-40.  On the other hand, the guidance related to software to be marketed and sold is prescribed by ASC Topic 985-20.

NASBA QAS - Text - NASBA Registry - 1980

Chapter 1
Internal-Use Software Arrangements

• Distinguish between software that is considered internal-use and not considered internal-use
• Recognize how implementation costs are accounted for in various stages of software development
• Identify when capitalization and amortization should commence
• Recognize how implementation costs of hosting arrangements are accounted for differently

Chapter 2
Software for Resale

• Recognize software that is within the scope of ASC Topic 985-20
• Identify how software costs are recorded prior to and after establishing technological feasibility
• Recognize how amortization is recorded for capitalized software costs
• Identify general disclosure requirements related to software for resale

Chapter 1 - Internal-Use Software Arrangements

Learning Objectives

Chapter Overview

Introduction

What is and is not Internal-Use Software

Scope of Internal-Use Software Guidance

Stages of Software Development

Preliminary Project Stage

Application Development Stage

Postimplementation-Operation Stage

Upgrades & Enhancements

Commencement of Capitalization

Amortization – Non-Cloud Based Arrangements

Amortization – Cloud Based Arrangements

Impairment Considerations

From Internal-Use to External

Presentation Requirements

Disclosure Requirements

SEC Filing Disclosure Examples

Chapter Review Questions

Chapter 2 - Software for Resale

Learning Objectives

Chapter Overview

Introduction

Scope

Technological Feasibility

Costs Incurred After Technological Feasibility

Production Costs

Inventory Costs

Purchased Software for Resale

Funded Software Development Arrangements

Amortization of Capitalized Costs

Chapter Review Questions

Glossary of Key Terms