{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/985/20/#15-scope-and-scope-exceptions","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":"985","topic_title":"Software","subtopic":"985-20","subtopic_title":"Costs of Software to Be Sold, Leased, or Marketed","section":{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"985-20-15-1","para":"15-1","html":"
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 985-10-15, with specific transaction qualifications and exceptions noted below.
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The guidance in this Subtopic applies to the costs, including costs incurred after the date of a business combination or a combination accounted for by a not-for-profit entity, of 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.
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The guidance in this Subtopic does not apply to the following transactions and activities:
  1. a
    Software developed or obtained for internal use (see Subtopic 350-40).
  2. b
    Research and development assets acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation. If tangible and intangible assets acquired in those combinations are used in research and development activities, they are recognized and measured at fair value in accordance with Subtopic 805-20.
  3. c
    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 the guidance on costs to fulfill a contract in Subtopic 340-40).
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As used in this Subtopic, the terms computer software product, software product, and product encompass a computer software program, a group of programs, and a product enhancement.
","snippet":"As used in this Subtopic, the terms computer software product, software product, and product encompass a computer software program, a group of programs, and a product enhancement.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9669f8f1c337ad3dfcb9e6cbf82a4046f2692d1f2d256c7b6b2979660b7de542","downloaded_from":"2026-09-10T02:28:33.445Z","last_downloaded_at":"2026-09-10T02:28:33.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481436","source_sha256":"ff40ab11eb95c712b32902175b97a0ba5bd6828878528bf8fcffb08aa4cff9c9"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d383eb2d5dd00eaed9e51513836d2d2273c15ac346a07c0d6aeeea2d163190e3","downloaded_from":"2026-09-10T02:28:33.445Z","last_downloaded_at":"2026-09-10T02:28:33.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481436","source_sha256":"ff40ab11eb95c712b32902175b97a0ba5bd6828878528bf8fcffb08aa4cff9c9"}},{"block":null,"heading":"Software Subject to a Hosting Arrangement","paragraphs":[{"citation":"985-20-15-5","para":"15-5","html":"
The software subject to a hosting arrangement is within the scope of this Subtopic only 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.
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For purposes of criterion (a) in paragraph 985-20-15-5, the term 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.
","snippet":"For purposes of criterion (a) in paragraph 985-20-15-5, the term significant penalty contains two distinct concepts:\n(a) The ability to take delivery of the software without incurring significant cost\n(b) The ability to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a1f454206e7f0179fdb6015936a871252aec7268667c13bbc39998ac9f467dab","downloaded_from":"2026-09-10T02:28:33.445Z","last_downloaded_at":"2026-09-10T02:28:33.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481436","source_sha256":"ff40ab11eb95c712b32902175b97a0ba5bd6828878528bf8fcffb08aa4cff9c9"}},{"citation":"985-20-15-7","para":"15-7","html":"
If the software subject to a hosting arrangement never meets the criteria in paragraph 985-20-15-5, then the software is utilized in providing services and is not within the scope of this Subtopic and, therefore, the development costs of the software should be accounted for in accordance with Subtopic 350-40 on internal-use software (see also paragraph 985-20-55-2).
","snippet":"If the software subject to a hosting arrangement never meets the criteria in paragraph 985-20-15-5, then the software is utilized in providing services and is not within the scope of this Subtopic and, therefore, the dev…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51e29e71b548124963a9163fd8873be03f5881a5a00eb6afbfee4626fe8f3614","downloaded_from":"2026-09-10T02:28:33.445Z","last_downloaded_at":"2026-09-10T02:28:33.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481436","source_sha256":"ff40ab11eb95c712b32902175b97a0ba5bd6828878528bf8fcffb08aa4cff9c9"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:679a522624b10a70ef2656d1d7b8c9d3231cae20628e8ed4813171d63b919976","downloaded_from":"2026-09-10T02:28:33.445Z","last_downloaded_at":"2026-09-10T02:28:33.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481436","source_sha256":"ff40ab11eb95c712b32902175b97a0ba5bd6828878528bf8fcffb08aa4cff9c9"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f87a5a3cd6e4e78875b41782cd0e6a1c8e0dc104eedfe4c5e919a2f220683c01","downloaded_from":"2026-09-10T02:28:33.445Z","last_downloaded_at":"2026-09-10T02:28:33.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481436","source_sha256":"ff40ab11eb95c712b32902175b97a0ba5bd6828878528bf8fcffb08aa4cff9c9"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f87a5a3cd6e4e78875b41782cd0e6a1c8e0dc104eedfe4c5e919a2f220683c01","downloaded_from":"2026-09-10T02:28:33.445Z","last_downloaded_at":"2026-09-10T02:28:33.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481436","source_sha256":"ff40ab11eb95c712b32902175b97a0ba5bd6828878528bf8fcffb08aa4cff9c9"}}