ASC

ASC 330-985

Software

330 Inventory

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In brief

IntermediateInventory and PP&ERecognitionDerecognitionIndustry-specific

This subtopic governs how a software vendor accounts for the costs of producing physical copies of software to be sold, leased, or otherwise marketed. Costs of duplicating the software, documentation, and training materials from the product masters and of physically packaging the product for distribution are capitalized as inventory on a unit-specific basis (330-985-25-1). Those capitalized costs are charged to cost of sales when revenue from the sale of the related units is recognized (330-985-40-1).

Key points (4)
  • Scope follows the Software Overall Subtopic, Section 985-10-15 (330-985-15-1), i.e., software to be sold, leased, or otherwise marketed.
  • Duplication costs for the software, documentation, and training materials from product masters, plus physical packaging costs for distribution, are capitalized as inventory on a unit-specific basis (330-985-25-1).
  • Capitalized duplication and packaging costs are charged to cost of sales when revenue from the sale of those units is recognized (330-985-40-1), matching cost with revenue.
  • The guidance addresses only inventory costs of computer software (330-985-05-1); costs of developing the product masters themselves are addressed elsewhere in Topic 985.

For students. Exam trap: distinguish costs of creating the product master (software development costs under 985-20, amortized as an asset) from costs of duplicating and packaging copies (inventory here, expensed to cost of sales as units sell). Students often expense duplication costs as incurred instead of capitalizing them as inventory.

product mastersduplication costspackaging costsunit-specific capitalizationsoftware inventorycost of salessoftware to be sold, leased, or marketed

Machine-generated study aid for ASC 330-985. Check the source paragraphs below.

330-985-05Overview and Background

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330-985-05-1
This Subtopic provides guidance on inventory costs of computer software.

330-985-15Scope and Scope Exceptions

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Overall Guidance

330-985-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 985-10-15.

330-985-25Recognition

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330-985-25-1
The costs incurred for duplicating the computer software, documentation, and training materials from the product masters and for physically packaging the product for distribution shall be capitalized as inventory on a unit-specific basis.

330-985-40Derecognition

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330-985-40-1
The costs incurred for duplicating the computer software, documentation, and training materials from the product masters and for physically packaging the product for distribution shall be charged to cost of sales when revenue from the sale of those units is recognized.

Related subtopics