Revised Software Policy
Note: Effective through the State fiscal year ended June 30, 2009. (See new Intangible Assets policy)
7/1/98, Revised 7/1/2001
Generally, all software purchased or developed for internal use should be expensed and not capitalized for financial reporting purposes.
However, agencies that are component units of the state, may capitalize software purchased or developed for internal use if software is significant to their separately issued financial statements. Capitalizable costs should only include direct costs of materials and services consumed in developing or obtaining internal-use software, payroll and payroll-related costs devoted directly to the project, and interest costs incurred during development. Upgrades and enhancements should be capitalized only to the extent that they increase the functionality of the product. Costs related to the preliminary project stage should be expensed as incurred. Likewise, training costs and data conversion costs should be expensed as incurred. If capitalized, internal-use software should be reported as an intangible capital asset and amortized on a straight-line basis over its anticipated useful life.