{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/705/985/#sec-99-sec-materials","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"705","topic_title":"Cost of Sales and Services","subtopic":"705-985","subtopic_title":"Software","section":{"number":"S99","label":"SEC 99 SEC Materials","anchor":"sec-99-sec-materials","is_sec":true,"groups":[{"block":null,"heading":"SEC Staff Guidance","paragraphs":[{"citation":"705-985-S99-1","para":"S99-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">The following is the text of SEC Observer Comment: Accounting for the Film and Software Costs Associated with Developing Entertainment and Educational Software Products.<ul class=\"ul simple\" id=\"d3e675224-123041__GUID-7549E38A-743E-4CF8-B063-8C50BF2661B7\"><li class=\"li\" id=\"d3e675224-123041__SL6503575-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22DE03-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The SEC staff has become aware of diversity in the application of generally accepted accounting principles to exploitation, film, and other software development costs associated with EE products. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503576-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22DFC7-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The SEC staff has learned that certain registrants are recording all costs incurred in the development of EE products pursuant to the provisions of Topics <a altsource=\"GUID-0E6013E0-B3AD-439D-94D5-AF9AD41B91E3.ditamap\" class=\"ditamap\">340</a>, <a altsource=\"GUID-50533A58-2084-4E0F-A784-198CE27ADF6D.ditamap\" class=\"ditamap\">720</a>, and <a altsource=\"GUID-388ADB86-1B55-4821-B899-B35D608FEC31.ditamap\" class=\"ditamap\">985</a>. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503577-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22E180-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Other registrants are separating exploitation and film costs from other software development costs and accounting for the other software development costs using Topic <a altsource=\"GUID-388ADB86-1B55-4821-B899-B35D608FEC31.ditamap\" class=\"ditamap\">985</a> and capitalizing film and exploitation costs as film cost inventory as described in Topic <a altsource=\"GUID-F9A8144F-D577-41E6-B92E-C433E3D5FA08.ditamap\" class=\"ditamap\">926</a>. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503578-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22E314-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Still other registrants, principally film production companies, are capitalizing all costs relating to the development of EE products as film cost inventory. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503579-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22E540-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The SEC staff views stated here are not intended to apply to costs incurred to produce computer-generated special effects and images used in products that are exhibited in theaters or licensed to television stations because those costs are addressed by Topic <a altsource=\"GUID-F9A8144F-D577-41E6-B92E-C433E3D5FA08.ditamap\" class=\"ditamap\">926</a>. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503580-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22E6C5-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Topic <a altsource=\"GUID-388ADB86-1B55-4821-B899-B35D608FEC31.ditamap\" class=\"ditamap\">985</a> establishes standards of financial accounting and reporting for the costs of all computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process, whether internally developed and produced or purchased. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503581-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22E7C0-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The SEC staff believes that EE products that are sold, leased, or otherwise marketed are subject to the accounting requirements of Topic <a altsource=\"GUID-388ADB86-1B55-4821-B899-B35D608FEC31.ditamap\" class=\"ditamap\">985</a>. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503582-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22E8B6-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The SEC staff does not believe that other standards of financial accounting and reporting or that industry practice are acceptable alternatives to those requirements. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503583-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22E9B7-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The SEC staff also believes that film costs incurred in the development of an EE product should be accounted for under the provisions of Topic <a altsource=\"GUID-388ADB86-1B55-4821-B899-B35D608FEC31.ditamap\" class=\"ditamap\">985</a>, not the provisions of Topic <a altsource=\"GUID-F9A8144F-D577-41E6-B92E-C433E3D5FA08.ditamap\" class=\"ditamap\">926</a>. </span></span></div></li><li class=\"li\" id=\"d3e675224-123041__SL6503584-123041\"><div class=\"p\"><span class=\"sfragment\" id=\"sfr_4F22EB11-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">In addition, exploitation costs should be expensed as incurred unless those costs include advertising costs that qualify for capitalization in accordance with the provisions of Topics <a altsource=\"GUID-0E6013E0-B3AD-439D-94D5-AF9AD41B91E3.ditamap\" class=\"ditamap\">340</a> and <a altsource=\"GUID-50533A58-2084-4E0F-A784-198CE27ADF6D.ditamap\" class=\"ditamap\">720</a>. </span></span></div></li></ul></div></div>","snippet":"The following is the text of SEC Observer Comment: Accounting for the Film and Software Costs Associated with Developing Entertainment and Educational Software Products.\nThe SEC staff has become aware of diversity in the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:113c30b069145e5cc83d8095b5dd4a4f862d94f4cb004bbbd21fa5f5133074c5","downloaded_from":"2026-09-10T00:57:08.857Z","last_downloaded_at":"2026-09-10T00:57:08.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478937","source_sha256":"7b213d6be416f494eafdea2f0800037c74113a5690d01fcb90adb33f1bb1ea80"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b76b6a5c216dada46de9378cd85eb0b69ea288e50920ff81e4c71c37f63734ed","downloaded_from":"2026-09-10T00:57:08.857Z","last_downloaded_at":"2026-09-10T00:57:08.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478937","source_sha256":"7b213d6be416f494eafdea2f0800037c74113a5690d01fcb90adb33f1bb1ea80"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c766b150b6bbd33d87135af11bde3b9830e25ca6594cd6dea179bee775e91883","downloaded_from":"2026-09-10T00:57:08.857Z","last_downloaded_at":"2026-09-10T00:57:08.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478937","source_sha256":"7b213d6be416f494eafdea2f0800037c74113a5690d01fcb90adb33f1bb1ea80"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c766b150b6bbd33d87135af11bde3b9830e25ca6594cd6dea179bee775e91883","downloaded_from":"2026-09-10T00:57:08.857Z","last_downloaded_at":"2026-09-10T00:57:08.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478937","source_sha256":"7b213d6be416f494eafdea2f0800037c74113a5690d01fcb90adb33f1bb1ea80"}}