I am working for a small start up that creates web based software applications.

Under GAAP are we allowed to book the payroll amounts for our software programmers and software engineers as an asset to depreciate?

Basically, can we depreciate the payroll amounts for software creation? Can we depreciate the payroll amounts for time spent on training and implementation of the systems with our clients?

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Originally Posted by abayless

I am working for a small start up that creates web based software applications.

Under GAAP are we allowed to book the payroll amounts for our software programmers and software engineers as an asset to depreciate?

Basically, can we depreciate the payroll amounts for software creation? Can we depreciate the payroll amounts for time spent on training and implementation of the systems with our clients?

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Simply put no you cannot capitalize and depreciate these costs as they would be considered research and development costs, which must be charged as an expense when incurred.

I knew this without doing any research but I thought you would want to know why I am saying this so please refer to SFAS 2: http://www.fasb.org/pdf/aop_FAS2.pdf

Also you cannot capitalize the cost for time spent on training and implementation of systems with your clients. This would violate the matching principle (recognize costs in the same period you recognize the revenue associated with it)

I cannot think of any instance where you can capitalize payroll costs, it’s always a cost of the current period.