Internal Use Software – Determining Which Accounting Guidance to Use

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In the last decade, the cloud computing industry has grown exponentially. Software-as-a-service (SaaS) platforms are currently dominating the industry, and internal use software offerings and methods of delivery are continuously evolving. Despite these sweeping changes, accounting guidance has had no major changes. As a result, people are often confused on how to account for the cost of developing a SaaS product in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Entities continuously question whether they should follow ASC 350-40: Internal-Use Software or ASC 985-20: Costs of Software to Be Sold, Leased or Marketed. In most cases, SaaS companies should follow …read more

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