FASB's new proposal on software cost accounting is here! From cash flow reporting to simplified capitalization rules, these changes could reshape how tech companies report their financials.
📊 Attention CFOs, CAOs, and Controllers: Major FASB Update on Software Cost Accounting! 🖥️ The FASB has made significant decisions that will impact how we account for software development costs. All of the reported decisions are tentative and may be changed at future Board meetings. Here's what you need to know: 1️⃣ Targeted Improvements: Instead of a complete overhaul, the FASB is focusing on modernizing ASC 350-40 for agile software development. 2️⃣ Goodbye, Staging Guidance: The FASB plans to eliminate the requirement to identify preliminary and application development stages. This change acknowledges the reality of non-linear development methods like Agile. 3️⃣ New Capitalization Criteria: Costs will be capitalized when: a) Management authorizes and commits to funding the project b) It's probable the project will be completed and used as intended 4️⃣ Development Uncertainties: Entities must consider significant uncertainties, including high-risk development issues ( novel, unique, unproven functions and features or technological innovations), when evaluating project completion probability. 5️⃣ Website Development: ASC 350-50 on website development costs will be integrated into ASC 350-40 6️⃣ Impact: What does this mean for your company? ➡️ Potential reduction in tracking efforts for software costs ➡️ More software costs may move off balance sheets, especially for SaaS ➡️ Improved alignment with modern development practices 💡 At InScope, we're closely monitoring these developments to ensure our financial reporting solutions stay ahead of the curve. More info here: https://lnkd.in/gty_-UXR 🆓 P.S. DM me if you want access to InScope’s simple and user-friendly disclosure library 📑 where you can access disclosure templates and public company disclosures for FREE.
