Software Capitalisation

Definition

The accounting policy governing whether expenditure on developing software is recognised as an intangible asset on the balance sheet or expensed immediately. Under IAS 38, internal software development costs in the application development stage may be capitalised when technological feasibility is established and future economic benefits are probable. The capitalisation threshold decision has material implications for reported earnings, asset values, and EV/EBITDA comparability between companies with different accounting policies.