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Costs of computer software developed or obtained for internal use that shall be capitalized include only the following:
  1. a
    External direct costs of materials and services consumed in developing or obtaining internal-use computer software. Examples of those costs include but are not limited to the following:
    1. 1
      Fees paid to third parties for services provided to develop the software during the application development stage
    2. 2
      Costs incurred to obtain computer software from third parties
    3. 3
      Travel expenses incurred by employees in their duties directly associated with developing software.
  2. b
    Payroll and payroll-related costs (for example, costs of employee benefits) for employees who are directly associated with and who devote time to the internal-use computer software project, to the extent of the time spent directly on the project. Examples of employee activities include but are not limited to coding and testing during the application development stage.
  3. c
    Interest costs incurred while developing internal-use computer software. Interest shall be capitalized in accordance with the provisions of Subtopic 835-20.
Transition date:(P) December 16, 2027; (N) December 16, 2027Transition guidance:
350-40-65-4
Editor's Note: The content of paragraph 350-40-30-1 will change upon transition, together with a change in the heading noted below.
> Capitalizable Costs
Costs of computer software developed or obtained for internal use that shall be capitalized include only the following:
  1. a
    External direct costs of materials and services consumed in developing or obtaining internal-use computer software. Examples of those costs include but are not limited to the following:
    1. 1
      Fees paid to third parties for services provided to develop the software
    2. 2
      Costs incurred to obtain computer software from third parties
    3. 3
      Travel expenses incurred by employees in their duties directly associated with developing software.
  2. b
    Payroll and payroll-related costs (for example, costs of employee benefits) for employees who are directly associated with and who devote time to the internal-use computer software project, to the extent of the time spent directly on the project. Examples of employee activities include but are not limited to design of chosen path, including software configuration and software interfaces, coding, installation to hardware, and testing, including parallel processing phase.
  3. c
    Interest costs incurred while developing internal-use computer software. Interest shall be capitalized in accordance with the provisions of Subtopic 835-20.
  4. d
    Costs to develop or obtain software that allows for access to or conversion of old data by new systems.
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If the entity suspends substantially all activities related to the software developed or obtained for internal use, interest capitalization shall cease until activities are resumed.
","snippet":"If the entity suspends substantially all activities related to the software developed or obtained for internal use, interest capitalization shall cease until activities are resumed.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6df9d2b67c703fd4e81b1738c29dca4db50e048d7816785f4fd2a25a3e97c886","downloaded_from":"2026-09-10T00:02:28.885Z","last_downloaded_at":"2026-09-10T00:02:28.885Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482633","source_sha256":"d552065a1f2aa56a378e9d8e14e8ad06dc9f50c5806434f746de3da5485990f9"}},{"citation":"350-40-30-3","para":"30-3","html":"
General and administrative costs and overhead costs shall not be capitalized as costs of internal-use software.
","snippet":"General and administrative costs and overhead costs shall not be capitalized as costs of internal-use software.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a644eec59ebd1c44602961cb327fe709edb7428d5c81e8b382308560c41e75a","downloaded_from":"2026-09-10T00:02:28.885Z","last_downloaded_at":"2026-09-10T00:02:28.885Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482633","source_sha256":"d552065a1f2aa56a378e9d8e14e8ad06dc9f50c5806434f746de3da5485990f9"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e61f0eff32e52cff87187b269a986127ff382557951fd4c1187553cd15ffb1f5","downloaded_from":"2026-09-10T00:02:28.885Z","last_downloaded_at":"2026-09-10T00:02:28.885Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482633","source_sha256":"d552065a1f2aa56a378e9d8e14e8ad06dc9f50c5806434f746de3da5485990f9"}},{"block":null,"heading":"Multiple-Element Arrangements Included in Purchase Price","paragraphs":[{"citation":"350-40-30-4","para":"30-4","html":"
Entities may purchase internal-use computer software from a third party or may enter into a hosting arrangement. In some cases, the price includes multiple elements, such as the license or hosting, training for the software, maintenance fees for routine maintenance work to be performed by the third party, data conversion costs, reengineering costs, and rights to future upgrades and enhancements. Entities shall allocate the cost among all individual elements. The allocation shall be based on the relative standalone priceof the elements in the contract, not necessarily separate prices stated within the contract for each element. Those elements included in the scope of this Subtopic shall be accounted for in accordance with the provisions of this Subtopic.
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An entity shall apply the General Subsection of this Section as though the hosting arrangement that is a service contract were an internal-use computer software project to determine when implementation costs of a hosting arrangement that is a service contract are and are not capitalized.
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