Accounting for software costs


Accounting for software costs can be complex. In fact, no fewer than five Topics in the FASB’s Codification offer guidance on how to account for the costs of developing, purchasing, and implementing software. This guidance is nuanced, depending on how a company either obtains or develops, and how it ultimately uses, the software.

Our Viewpoint, Accounting for software costs, unravels the FASB’s guidance on accounting for software costs in ASC 350-40, Internal-Use Software, ASC 985-20, Software – Costs of Software to Be Sold, Leased or Marketed, and ASC 730, Research and Development. We use direct citations from the Codification, examples that we’ve created to illustrate the FASB’s guidance, and insights based on our experience with clients and conversations with colleagues and standard-setters.

This publication will be updated periodically to reflect new guidance and practice issues that develop. It reflects the adoption of the following recently issued Accounting Standards Update, which impact the accounting for software costs:

  • ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)
  • ASC 606, Revenue from Contracts with Customer



Sandra J. Heuer

Sandra Heuer is a partner in the Accounting Principles Group. Based in our Minneapolis office, she is also part of the National Professional Standards Group, where she has served eight years as a technical accounting resource to audit engagement teams.

Minneapolis, Minnesota

  • Manufacturing, Transportation & Distribution
  • Technology, media & telecommunications
  • Transportation & distribution
  • Retail & consumer brands
Service Experience
  • Audit & Assurance
  • Public company audit


Our audit insights