"If software development expenditures slowed such that current expenditures were lower than the amortisation of prior periods’ capitalised software development expenditures, then expensing software development costs would have the effect of increasing income relative to capitalising it.
Imagine a company, which spends the following on software development (at the beginning of year year): Year 1: 100 Year 2: 20
These investments are assumed to have a useful life of 2 years each. so if the company follows a policy of capitalising development expenses and then amortising them:
Year 1 amortisation = 100/2 = 50 Year 2 amortisation = 100/2 + 20/2 = 60
If instead, the company were expensing the development costs as incurred, the Year 2 charge to the income statement would only be 20, giving higher income relative to the previous scenario. Of course, expensing would have given you a much bigger income statement charge, so lower income, in Year 1!