Under SFAS No. 86, “Accounting for the Cost of Computer Software to be Sold, Leased, or Otherwise Marketed,” development costs incurred in the research and development of new software products are expensed as incurred until technological feasibility in the form of a working model has been established. At that time, such costs are capitalized, subject to a net realizable value evaluation.
Technological feasibility is established upon the completion of an integrated working model. A company whose software development is completed concurrent with the establishment of technological feasibility, accordingly, may charge to research and development expense in the accompanying consolidated statements of operations, all software development costs. Should technological feasibility occur prior to the completion of our software development, all costs incurred between technological feasibility and software development completion may be capitalized.
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