# ASC 350-40-35: Intangibles—Goodwill and Other — Internal-Use Software — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/350/40/#35-subsequent-measurement) 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): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:108a9b404df763d9fa6f9aa93015edc0a84a3b5e12649606069c0cb461a95803 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 350-40-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/350/40/#35-subsequent-measurement) SEC content: no #### Impairment ##### [350-40-35-1](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:62eec78c9edc49bf73963ca310e55a9f1ed7b959c7bb1d94f9cc77e8b500e692 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Impairment shall be recognized and measured in accordance with the provisions of Section 360-10-35, which requires that assets be grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The guidance is applicable, for example, when one of the following events or changes in circumstances occurs related to computer software being developed or currently in use indicating that the carrying amount may not be recoverable: 1. a Internal-use computer software is not expected to provide substantive service potential. 2. b A significant change occurs in the extent or manner in which the software is used or is expected to be used. 3. c A significant change is made or will be made to the software program. 4. d Costs of developing or modifying internal-use computer software significantly exceed the amount originally expected to develop or modify the software. ##### [350-40-35-2](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:811cc5be26fe7609482392c7e9d19f60bf8564796b4baef7cad60a45eddede65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [360-10-35-47 through 35-49](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-47) requires that the asset be accounted for as abandoned when it ceases to be used. ##### [350-40-35-3](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-3) Pending content: yes Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:23a761f212875f9ca648ae58bf687ff6f0b6aca7f3898abbcbe08abd0069adb8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When it is no longer probable that computer software being developed will be completed and placed in service, the asset shall be reported at the lower of the carrying amount or fair value, if any, less costs to sell. The rebuttable presumption is that such uncompleted software has a fair value of zero. Indications that the software may no longer be expected to be completed and placed in service include the following: 1. a A lack of expenditures budgeted or incurred for the project. 2. b Programming difficulties that cannot be resolved on a timely basis. 3. c Significant cost overruns. 4. d Information has been obtained indicating that the costs of internally developed software will significantly exceed the cost of comparable third-party software or software products, so that management intends to obtain the third-party software or software products instead of completing the internally developed software. 5. e Technologies are introduced in the marketplace, so that management intends to obtain the third-party software or software products instead of completing the internally developed software. 6. f Business segment or unit to which the software relates is unprofitable or has been or will be discontinued. 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)If the capitalization requirements in paragraphs [350-40-25-12 through 25-12A](https://asc.understandingaccounting.org/asc/350/40/#350-40-25-12) are no longer met for software being developed, the asset shall be reported at the lower of the carrying amount or fair value, if any, less costs to sell. The rebuttable presumption is that such uncompleted software has a fair value of zero. Indications that the capitalization requirements in paragraphs [350-40-25-12 through 25-12A](https://asc.understandingaccounting.org/asc/350/40/#350-40-25-12) are no longer met include the following: 1. a A lack of expenditures budgeted or incurred for the project. 2. b Programming difficulties that cannot be resolved on a timely basis. 3. c Significant cost overruns. 4. d Information has been obtained indicating that the costs of internally developed software will significantly exceed the cost of comparable third-party software or software products, so that management intends to obtain the third-party software or software products instead of completing the internally developed software. 5. e Technologies are introduced in the marketplace, so that management intends to obtain the third-party software or software products instead of completing the internally developed software. 6. f Business segment or unit to which the software relates is unprofitable or has been or will be discontinued. #### Amortization ##### [350-40-35-4](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:e0bbf218affc2f26a18eda0ed36479af8c1164e2bda7ea7e78119a81e257cce0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The costs of computer software developed or obtained for internal use shall be amortized on a straight-line basis unless another systematic and rational basis is more representative of the software's use. ##### [350-40-35-5](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:33bda494596eec173a00956be5528d952e823d9986f7c65187c6febb13d5c2c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In determining and periodically reassessing the estimated [useful life](https://asc.understandingaccounting.org/glossary/u/#useful-life "The period over which an asset is expected to contribute directly or indirectly to future cash flows.") over which the costs incurred for internal-use computer software will be amortized, entities shall consider the effects of all of the following: 1. a Obsolescence 2. b Technology 3. c Competition 4. d Other economic factors 5. e Rapid changes that may be occurring in the development of software products, software operating systems, or computer hardware and whether management intends to replace any technologically inferior software or hardware. Given the history of rapid changes in technology, software often has had a relatively short useful life. ##### [350-40-35-6](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:3767b47279c75c2ef10d44b12882cc68b228cd156946ef746966f58b1e04710b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For each module or component of a software project, amortization shall begin when the computer software is ready for its intended use, regardless of whether the software will be placed in service in planned stages that may extend beyond a reporting period. For purposes of this Subtopic, computer software is ready for its intended use after all substantial testing is completed. If the functionality of a module is entirely dependent on the completion of other modules, amortization of that module shall begin when both that module and the other modules upon which it is functionally dependent are ready for their intended use. #### Internal-Use Computer Software Subsequently Marketed ##### [350-40-35-7](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:64515612dcb79fd24a6c0f4b5af1c1e25b31fb5b0eadf6450bea2a7fc5ca49cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If, after the development of internal-use software is completed, an entity decides to market the software, proceeds received from the license of the computer software, net of direct incremental costs of marketing, such as commissions, software reproduction costs, warranty and service obligations, and installation costs, shall be applied against the carrying amount of that software. ##### [350-40-35-8](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:7823897b984ea9fe58a4862cbcd960732618313244586b49b937a70f8fc3e992 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. No profit shall be recognized until aggregate net proceeds from licenses and amortization have reduced the carrying amount of the software to zero. Subsequent proceeds shall be recognized as [revenue](https://asc.understandingaccounting.org/glossary/r/#revenue "Inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations.")in accordance with Topic 606 on revenue from [contracts](https://asc.understandingaccounting.org/glossary/c/#contract "An agreement between two or more parties that creates enforceable rights and obligations.") with [customers](https://asc.understandingaccounting.org/glossary/c/#customer "A party that has contracted with an entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.") or recognized as a gain in accordance with Subtopic 610-20 on derecognition of nonfinancial assets if the contract is not with a customer. ##### [350-40-35-9](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:de65a458e2e85f349f609cba8a7b322cb666ff5e7c8700ebd6a0311df763a9a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If, during the development of internal-use software, an entity decides to market the software to others, the entity shall follow the guidance in Subtopic 985-20. Amounts previously capitalized under this Subtopic shall be evaluated at each balance sheet date in accordance with paragraph [985-20-35-4](https://asc.understandingaccounting.org/asc/985/20/#985-20-35-4). Capitalized software costs shall be amortized in accordance with paragraphs [985-20-35-1 through 35-2](https://asc.understandingaccounting.org/asc/985/20/#985-20-35-1) . ##### [350-40-35-10](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:1dd694b2a066aa6cbb47ae0cd92496873d2187050cf5241c5dbc832f003ae55e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A pattern of deciding to market internal-use software during its development creates a rebuttable presumption that any software developed by that entity is intended for sale, lease, or other marketing, and thus is subject to the guidance in Subtopic 985-20. ### Implementation Costs of a Hosting Arrangement That Is a Service Contract #### Impairment ##### [350-40-35-11](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:31309bd29ba129d34f7432fbead4fd208b00ef563f0cf7368f986034e184c802 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Impairment shall be recognized and measured in accordance with the provisions of Section 360-10-35 as if the capitalized implementation costs were a long-lived asset. That guidance requires that assets be grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. The guidance is applicable, for example, when one of the following events or changes in circumstances occurs related to the [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 is a service contract indicating that the carrying amount of the related implementation costs may not be recoverable: 1. a The hosting arrangement is not expected to provide substantive service potential. 2. b A significant change occurs in the extent or manner in which the hosting arrangement is used or is expected to be used. 3. c A significant change is made or will be made to the hosting arrangement. ##### [350-40-35-12](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:4dd9015e7d38ca88100f717f6b72d471e1de33aeede089a14a1a56ae373f46ba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [360-10-35-47 through 35-49](https://asc.understandingaccounting.org/asc/360/10/#360-10-35-47) require that the asset be accounted for as abandoned when it ceases to be used. Implementation costs related to each module or component of a hosting arrangement that is a service contract shall be evaluated separately as to when it ceases to be used. #### Amortization ##### [350-40-35-13](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:7856d469de2a3f0c59905ce0e44d3db5ce37723249d177b2b8864e776f429ce4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Implementation costs capitalized in accordance with the Implementation Costs of a Hosting Arrangement That Is a Service Contract Subsections of this Subtopic shall be amortized over the term of the associated hosting arrangement, considering the guidance in paragraph [350-40-35-17](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-17), on a straight-line basis unless another systematic and rational basis is more representative of the pattern in which the entity expects to benefit from access to the hosted software. This Subsection considers the right to access the hosted software to be equivalent to actual use, which shall not be affected by the extent to which the entity uses, or the expectations about the entity's use of, the hosted software (for example, how many transactions the entity processes or expects to process or how many users access or are expected to access the hosted software). ##### [350-40-35-14](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-14) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:6c82f0b959034de04b69b2a3051978a01be22a5e44759c64fcd04e0beb0ba1e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity (customer) shall determine the term of the hosting arrangement that is a service contract as the fixed noncancellable term of the hosting arrangement plus all of the following: 1. a Periods covered by an option to extend the hosting arrangement if the entity (customer) is reasonably certain to exercise that option 2. b Periods covered by an option to terminate the hosting arrangement if the entity (customer) is reasonably certain not to exercise that option 3. c Periods covered by an option to extend (or not to terminate) the hosting arrangement in which exercise of the option is controlled by the vendor. ##### [350-40-35-15](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-15) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:e501028ce4ac3dba9d9cca073807c939a73204a3daf0852c41b09c8971b152e2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity (customer) shall periodically reassess the estimated term of the arrangement and shall account for any change in the estimated term as a change in accounting estimate in accordance with Topic 250 on accounting changes and error corrections. ##### [350-40-35-16](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-16) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:9625adddbe989f57ddba7af8682eee4dad793eae0263b59f9a927b3696f06255 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall consider the effects of all the following when determining the term of the hosting arrangement in accordance with paragraph [350-40-35-14](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-14) and when reassessing the term of the hosting arrangement in accordance with paragraph [350-40-35-15](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-15): 1. a Obsolescence 2. b Technology 3. c Competition 4. d Other economic factors 5. e Rapid changes that may be occurring in the development of hosting arrangements or hosted software 6. f Significant implementation costs that are expected to have significant economic value for the entity (customer) when the option to extend or terminate the hosting arrangement becomes exercisable. ##### [350-40-35-17](https://asc.understandingaccounting.org/asc/350/40/#350-40-35-17) Pending content: no Source downloaded (UTC): 2026-09-10T00:02:32.106Z to 2026-09-10T00:02:32.106Z Record version: sha256:15bdab143a0539c07345d158b7f66cf730a16d797fcaabc694d252358bbabd60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For each module or component of a hosting arrangement, an entity shall begin amortizing the capitalized implementation costs related to the hosting arrangement that is a service contract when the module or component of the hosting arrangement is ready for its intended use, regardless of whether the overall hosting arrangement will be placed in service in planned stages that may extend beyond a reporting period. For purposes of this Subsection, a hosting arrangement (or a module or component of a hosting arrangement) is ready for its intended use after all substantial testing is completed. If the functionality of a module or component is entirely dependent on the completion of other modules or components, the entity shall begin amortizing the capitalized implementation costs related to that module or component when both that module or component and the other modules or components upon which it is functionally dependent are ready for their intended use.