ASC

ASC 985-10

Overall

985 Software

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In brief

IntroductoryIndustry-specificRecognitionIntangibles and goodwill

ASC 985-10 is the Overall subtopic of the Software Topic, which sets the scope umbrella for the industry-specific software guidance (costs of software to be sold, leased, or marketed; inventory; intangibles—goodwill and other; provision for losses; cost of sales and services; and research and development). The Topic provides only incremental industry-specific guidance—entities within its scope must also apply all other applicable GAAP (985-10-15-1). It applies to all entities and to computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process (985-10-15-2 through 15-3).

Key points (7)
  • The Software Topic includes the Overall, Costs of Software to be Sold, Leased, or Marketed, Inventory, Intangibles—Goodwill and Other, Revenue Recognition—Provision for Losses, Cost of Sales and Services, and Research and Development Subtopics (985-10-05-1).
  • The Software Subtopics provide only incremental industry-specific guidance; entities in scope must also comply with applicable guidance outside the Topic (985-10-15-1).
  • The guidance applies to all entities (985-10-15-2).
  • Scope covers computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process (985-10-15-3).
  • Subtopics 985-20, 985-330, 985-350, 985-705, and 985-730 do not apply to software created for internal use, which is addressed by Subtopic 350-40 (985-10-15-3(b)).
  • Those same Subtopics do not apply to arrangements to deliver software or a software system requiring significant production, modification, or customization of software, which fall under Topic 606 and Subtopic 340-40 (985-10-15-3(c)).
  • Former software revenue recognition scope guidance in 985-10-15-3(a) was superseded by ASU 2014-09.

For students. This subtopic is mostly a roadmap: its practical value is knowing which software costs go to ASC 985-20 (externally marketed software) versus ASC 350-40 (internal-use software) versus ASC 606/340-40 (customized software arrangements). A common misunderstanding is treating ASC 985 as a self-contained regime—it is only incremental guidance layered on top of general GAAP, and the old software revenue recognition rules were superseded by ASC 606.

software to be sold, leased, or marketedinternal-use softwareincremental industry-specific guidancescopesignificant production, modification, or customizationcomputer software costs

Machine-generated study aid for ASC 985-10. Check the source paragraphs below.

985-10-00Status

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985-10-00-1
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
985-10-05-1 Amended Maintenance Update 2018-12 (PDF) 09/10/2018
985-10-05-1 Amended Accounting Standards Update No. 2014-09 05/28/2014
985-10-15-3 Amended Accounting Standards Update No. 2014-09 05/28/2014

985-10-05Overview and Background

Source downloaded: .Record version a3dbb5fc3e4b. Effective date must be checked in the source.

985-10-05-1
The Software Topic specifies standards of financial accounting and reporting for certain computer software. This Topic includes the following Subtopics:
  1. a
    Overall
  2. b
    Costs of Software to be Sold, Leased, or Marketed
  3. c
    Inventory
  4. d
    Intangibles—Goodwill and Other
  5. e
    Revenue Recognition—Provision for Losses
  6. f
    Cost of Sales and Services
  7. g
    Research and Development
  8. h
    Subparagraph superseded by Maintenance Update 2018-12.
985-10-05-2
[Not used]
985-10-05-3
[Not used]
985-10-05-4
[Not used]

985-10-15Scope and Scope Exceptions

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Overall Guidance

985-10-15-1
The Subtopics within the Software Topic only provide incremental industry-specific guidance for entities defined in this Scope Section, or as further defined in the Scope Sections of the individual Software Subtopics. Entities within the scope of this Topic shall also comply with the applicable guidance not included in this Topic.

Entities

985-10-15-2
The guidance in the Software Topic applies to all entities.

Transactions

985-10-15-3
Except as follows, the guidance in the Software Topic applies to computer software to be sold, leased, or otherwise marketed as a separate product or as part of a product or process:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2014-09.
  2. b
    Subtopics 985-20, 985-330, 985-350, 985-705, and 985-730 do not apply to software created for internal use (see Section 350-40-15).
  3. c
    Subtopics 985-20, 985-330, 985-350, 985-705, and 985-730 do not apply to arrangements to deliver software or a software system, either alone or together with other products or services, requiring significant production, modification, or customization of software (see Topic 606 on revenue from contracts with customers and Subtopic 340-40 on costs related to a contract with a customer).

Related subtopics