Software development costs can be capitalized once their technical feasibility is established i.e. software does what it is meant to do.
Product research and development costs must be expensed under GAAP but IFRS allows you to capitalize the development costs ONLY WHEN
1). You have a market to sell the product.
2). You intend to sell the product.
3). Technical feasibility is established.
4). Resources to compete.
5). Costs can be clearly determined.
You seem right on IFRS but on GAAP, there is a small problem. GAAP does not allow you to capitalize the development costs regardless of you producing the software for your own use or for market. Just remember that you are not allowed to capitalize the development costs at all under GAAP.
I read it in schweser guide clearly that you can mostly capitilize software development cost for internal use but now i can’t seem to find that particular content… although i could confirm it through various links…
All expenses related to r & d and software development are too be expensed… until under ifrs devlopment stage has been identified and under us…gaap the software is for self use or technological feasibility phase for software has been established.
I understand that in IFRS you expense till technical feasibility has been established and capitalize after that for both own use and sale. I am still not clear about US GAAP for both the criteria, can someone help? Please and thank you.