# ASC 350-40-15: Intangibles—Goodwill and Other — Internal-Use Software — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/350/40/#15-scope-and-scope-exceptions) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:fc62f936683ab006cbd3f70fc6c573993c4895b0f3a8788f716a9daa2c473074 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 350-40-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/350/40/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [350-40-15-1](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:15902de6415f736fd34bb293d65c7b1b658adc31fb3a394b1c0bd36fef48882a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsection of this Section establishes the pervasive scope for this Subtopic. The General Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 350-10-15, with specific transaction qualifications and exceptions noted below and in the Implementation Costs of a Hosting Arrangement That Is a Service Contract Subsection. #### Transactions ##### [350-40-15-2](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-2) Pending content: yes Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:f83fff2fe264a85cccba648d3151c84194e24f97f4a299bb9fafa9bec7ae401e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the General Subsections of this Subtopic applies to the following transactions and activities: 1. a Internal-use software 2. b The proceeds of computer software developed or obtained for internal use that is marketed 3. c New internal-use software developed or obtained that replaces previously existing internal-use software 4. d Computer software that consists of more than one component or module. For example, an entity may develop an accounting software system containing three elements: a general ledger, an accounts payable subledger, and an accounts receivable subledger. In this example, each element might be viewed as a component or module of the entire accounting software system. The guidance in this Subtopic shall be applied to individual components or modules. Transition date:(P) December 16, 2027; (N) December 16, 2027Transition guidance: [350-40-65-4](https://asc.understandingaccounting.org/asc/350/40/#350-40-65-4)The guidance in the General Subsections of this Subtopic applies to the following transactions and activities: 1. a Internal-use software 2. b The proceeds of computer software developed or obtained for internal use that is marketed 3. c New internal-use software developed or obtained that replaces previously existing internal-use software 4. d Computer software that consists of more than one component or module. For example, an entity may develop an accounting software system containing three elements: a general ledger, an accounts payable subledger, and an accounts receivable subledger. In this example, each element might be viewed as a component or module of the entire accounting software system. The guidance in this Subtopic shall be applied to individual components or modules. 5. e Costs incurred to develop a website. ##### [350-40-15-2A](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-2A) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:970c1e1b8ab234fec491a30843ad69f3d98f168b928f027f2ed9f7b0482ee09a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Internal-use software has both of the following characteristics: 1. a The software is acquired, internally developed, or modified solely to meet the entity's internal needs. 2. b During the software's development or modification, no substantive plan exists or is being developed to market the software externally. ##### [350-40-15-2B](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-2B) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:42b98d01fafd6ea32f6813b002e7354f9f033b5bb9263290263b65d2e122f9b6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A substantive plan to market software externally could include the selection of a marketing channel or channels with identified promotional, delivery, billing, and support activities. To be considered a substantive plan, implementation of the plan should be reasonably possible. Arrangements providing for the joint development of software for mutual internal use (for example, cost-sharing arrangements) and routine market feasibility studies are not substantive plans to market software for purposes of this Subtopic. Both characteristics in paragraph [350-40-15-2A](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-2A) must be met for software to be considered for internal use. ##### [350-40-15-2C](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-2C) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:1bbe0d2f628b28547e90e981c16df63f03e8d414fb63c129f80873cf7ca5117d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity's past practices related to selling software may help determine whether the software is for internal use or is subject to a plan to be marketed externally. For example, an entity in the business of selling computer software often both uses and sells its own software products. Such a past practice of both using and selling computer software creates a rebuttable presumption that any software developed by that entity is intended for sale, lease, or other marketing. ##### [350-40-15-3](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:fb6f297386fbcd8b9284c0c915b240954beb14f7ed001307182878eccaf8a126 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsections of this Subtopic provide guidance on when costs incurred for internal-use computer software are and are not capitalized. ##### [350-40-15-4](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:3b68ea9f3c42c8c48a7555f410256ef570f9e82a7d7e171edf6eb21ea2f8b47e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the following transactions and activities: 1. a Software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process, subject to Subtopic 985-20 2. b Software to be used in research and development, subject to Subtopic 730-10 3. c Software developed for others under a contractual arrangement, subject to contract accounting standards 4. d Accounting for costs of reengineering activities, which often are associated with new or upgraded software applications. 5. e [Subparagraph superseded by Accounting Standards Update No. 2018-15](https://asc.understandingaccounting.org/updates/asu-2018-15/). ##### [350-40-15-4A](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4A) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:1abe748865633c273f6f97244713580399dd3d190a2807c8161e8a2fc6cbb2ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the General Subsections of this Subtopic applies only to internal-use software that a customer obtains access to in a [hosting arrangement](https://asc.understandingaccounting.org/glossary/h/#hosting-arrangement "In connection with accessing and using software products, an arrangement in which the customer of the software does not currently have possession of the software; rather, the customer accesses and uses the software on an as-needed basis.") if both of the following criteria are met: 1. a The customer has the contractual right to take possession of the software at any time during the hosting period without significant penalty. 2. b It is feasible for the customer to either run the software on its own hardware or contract with another party unrelated to the vendor to host the software. ##### [350-40-15-4B](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4B) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:24bb9218390c10cae96c08be17feef2afe5e348980b1df3e14df6302b310e679 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of the guidance in paragraph [350-40-15-4A(a)](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4A), the term _without significant penalty_ contains two distinct concepts: 1. a The ability to take delivery of the software without incurring significant cost 2. b The ability to use the software separately without a significant diminution in utility or value. ##### [350-40-15-4C](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4C) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:77bb359c8a3af84615b2505facd4927a97aa64aaf1ed2113877b1189ea73d634 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Hosting arrangements that do not meet both criteria in paragraph [350-40-15-4A](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4A) are service contracts and do not constitute a purchase of, or convey a license to, software. ##### [350-40-15-4D](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4D) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:49cb4555297cf5a90174ee77f2359662b4df8783ee5fe8e2a78e3550444e00ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Implementation costs of a hosting arrangement that does not meet both criteria in paragraph [350-40-15-4A](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4A) shall be accounted for in accordance with the Implementation Costs of a Hosting Arrangement That Is a Service Contract Subsections of this Subtopic. ##### [350-40-15-5](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:d41b2b6e7765258600a6dd7398de7113f7615a071bf1145490ea228350d2939c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Costs of computer software that is sold, leased, or otherwise marketed as a separate product or as part of a product or process are within the scope of Subtopic 985-20. For example, software designed for and embedded in a semiconductor chip is included in the scope of that Subtopic because it is an integral part of the product. By contrast, software for internal use, though it may be used in developing a product, is not part of or included in the actual product or service sold. If software is used by the vendor in the production of the product or providing the service but the customer does not acquire the software or the future right to use it, the software is covered by this Subtopic. For example, for a communications entity selling telephone services, software included in a telephone switch is part of the internal equipment used to deliver a service but is not part of the product or service actually being acquired or received by the customer. Paragraph [350-40-55-1](https://asc.understandingaccounting.org/asc/350/40/#350-40-55-1) includes examples of computer software considered to be for internal use and thus not part of a product or process. Paragraph [350-40-55-2](https://asc.understandingaccounting.org/asc/350/40/#350-40-55-2) includes examples of when computer software is not for internal use. #### Other Considerations ##### [350-40-15-6](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:eed9154403f94ef91462ff250859f7de6f9fa02cb6c3aaa160e702b219f3e80d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not change any of the provisions in the following Subtopics: 1. a Subtopic 985-20 2. b Subtopic 720-45. ##### [350-40-15-7](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:38697b02f367b0c6aaace65ead141768429cf0feffddde6f119769cfe170b573 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following costs of internal-use computer software are included in research and development and shall be accounted for in accordance with the provisions of Subtopic 730-10: 1. a Purchased or leased computer software used in research and development activities where the software does not have alternative future uses 2. b All internally developed internal-use computer software (including software developed by third parties, for example, programmer consultants) in either of the following circumstances: 1. 1 The software is a pilot project (that is, software of a nature similar to a pilot plant as noted in paragraph [730-10-55-1(h)](https://asc.understandingaccounting.org/asc/730/10/#730-10-55-1)). 2. 2 The software is used in a particular research and development project, regardless of whether the software has alternative future uses. ### Implementation Costs of a Hosting Arrangement That Is a Service Contract ##### [350-40-15-8](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:95cb7a73857877e72d513b4723dbede38c925a074ff343f4b63ccfcf8746f70e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Implementation Costs of a Hosting Arrangement That Is a Service Contract Subsections of this Subtopic follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Section, with specific qualifications noted in paragraph [350-40-15-9](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-9). ##### [350-40-15-9](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:20.520Z to 2026-09-10T00:02:20.520Z Record version: sha256:f94aaf73bd10984794c9390dc00d559732fd4d7379b286f9fd336270d01fb0ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Implementation Costs of a Hosting Arrangement That Is a Service Contract Subsections of this Subtopic provide guidance on when costs incurred to implement a [hosting arrangement](https://asc.understandingaccounting.org/glossary/h/#hosting-arrangement "In connection with accessing and using software products, an arrangement in which the customer of the software does not currently have possession of the software; rather, the customer accesses and uses the software on an as-needed basis.") that does not meet both criteria in paragraph [350-40-15-4A](https://asc.understandingaccounting.org/asc/350/40/#350-40-15-4A) are and are not capitalized.