The New Software Accounting Rules-GASB 51

Slides:



Advertisements
Similar presentations
Financial Planning 1 Introduction and Budgeting. Learning Objectives Understand the importance of linking planning and budgeting Understand the importance.
Advertisements

Herbert Maguire, CPA, CGFM, MBA Commonwealth of Pennsylvania
How to Get into Financial Trouble with Your Grants.
Kamille Barroga Czarina Cabatay Danilo Galang Madonna Nilo Carmel Nucum.
Revenue Recognition - Multiple-Element Arrangements
Reporting and Interpreting Property, Plant and Equipment; Natural Resources; and Intangibles Chapter 8 McGraw-Hill/Irwin © 2009 The McGraw-Hill Companies,
Health Informatics Series
Time and Cost Estimation
Integrated Practice Management Systems. Learning Objectives After reading this chapter the reader should be able to: Document the workflow in a medical.
Software Evolution Planning CIS 376 Bruce R. Maxim UM-Dearborn.
Simplify your work Enterprise Services Center Oracle E-Business Asset Lifecycle Management: Maximize Your Return on Assets.
1 CAPACITY BUILDING AND TRAINING ON PROCUREMENT Session 9 – The World Bank Procedures for IT Procurement September 21, 2005 by Arif Hassan.
Intangible Assets Mark Fielding-Pritchard 2015Intangibles1.
◦ (a) The prior period's closing balances have been correctly brought forward to the current period or, when appropriate, have been restated; and ◦ (b)
The Systems Analysis Toolkit
Long-Term Investments in Productive Assets Chapter 12 Robinson, Munter, Grant.
© The McGraw-Hill Companies, Inc., 2003 McGraw-Hill/Irwin Slide 9-1 PLANT AND INTANGIBLE ASSETS Chapter 9.
Precision Experience Assurance GASB No. 51 Accounting and Financial Reporting for Intangible Assets Helen Y. Painter CPA, Partner Purvis Gray & Company.
INTANGIBLE ASSETS Patent Pending.
HKAS 38 Intangible Assets
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF SRI LANKA
Connolly – International Financial Accounting and Reporting – 4 th Edition CHAPTER 9 INTANGIBLE ASSETS.
Accounting for Intangible Assets
Systems Analysis and Design Fourth Edition Introduction  A project is economically feasible if the future benefits outweigh the costs  The Systems Analyst’s.
Fundamentals of Information Systems, Third Edition1 Systems Design Answers the question “How will the information system do what it must do to solve a.
Property, Plant, and Equipment, and Intangibles
Protecting Data Rights Under DoD Contracts October 14, 2009 NCMA Workshop Cape Canaveral Chapter Keith R. Szeliga Sheppard Mullin Richter & Hampton.
Chapter 12: Intangible Assets 1. 2 Intangible Assets Intangible Assets Intangible assets characterized by – (1) lack of physical evidence, and – (2) high.
ITFMA - Presentation Abstract In the presentation to follow the accounting guidelines for internally developed software will be discussed. The presenter.
August, 2013 Accounting for Agile Projects Disclaimer: This document does not offer specific accounting advice, but represents a practical and viable Agile.
IAS 38.  Intangible asset = an identifiable non-monetary asset without physical substance  Identifiable: ◦ Separable ◦ Arises from contractual or legal.
Accounting (Basics) - Lecture 3 Property, plant and equipment.
10 Measures of Operating Capacity © 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for.
Chapter 5 Electronic Presentations in Microsoft ® PowerPoint ® Prepared by James Myers, C.A. University of Toronto © 2008 McGraw-Hill Ryerson Limited.
ALI SALMAN1 LECTURE - 05 ASST PROF. ENGR ALI SALMAN ceme.nust.edu.pk DEPARTMENT OF ENGINEERING MANAGEMENT COLLEGE OF E & ME, NUST DEPARTMENT.
Willet C. Jim Financial Consultant Zenas Legal Practice (ACCA, B.Acc UZ)
Accounting for Intangible Assets 1 Rangajewa Herath B.Sc. Accountancy and Financial Management(Sp.)(USJ) MBA-PIM(USJ)
Financial Accounting II Lecture 08. Intangible Assets Companies Ordinance 1984.
Systems Development Process Developing our own software The Business Perspective Copyright © 2016 Curt Hill.
F Designed to give you the knowledge and application of: Section C: Financial Statements C1. Statements of cash flows C2. Tangible non-current.
Acquisition Cost of P,P&E  All costs necessary to acquire asset and prepare for intended use Purchase Price + Taxes LO 2 Examples: Purchase price Taxes.
IAS 38 INTANGIBLE ASSETS CA. Anuradha Jain Ex-Joint Director (Tech), ICAI.
FYE June 30, 2016 FISCAL YEAR-END PROCEDURES. BUDGET VS.FINANCIAL STATEMENTS YEAR END PROCESS.
COPYRIGHT © 2011 South-Western/Cengage Learning 8 PowerPoint Author: Catherine Lumbattis Operating Assets Property, Plant, and Equipment, and Intangibles.
Accounting of Fixed Assets Special Cases. Revaluation of Assets Revaluation model versus Cost model The disconnect between historical costs and current.
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Plant and Intangible Assets Chapter 9.
Chapter 17.
Plant and Intangible Assets
International Accounting Standard 16 Property, Plant and Equipment
Chapter 9 Impairment of Assets.
Fundamentals of Information Systems, Sixth Edition
Acquisition Cost of P,P&E
Accounting for Intangible Assets
What is goodwill? Goodwill is an intangible asset representing non-physical items that add to a company’s value but cannot be easily identified or valued.
10 Measures of Operating Capacity.
Overview of Business Processes
MFRS 138 – INTANGIBLE ASSETS
Chapter 17.
R&D; Goodwill; Intangible Assets and Brands
Systems Analysis and Design
Chapter 17.
Information Systems, Ninth Edition
Outline Definition and common types of intangible assets
R&D; Goodwill; Intangible Assets and Brands
Chapter 17.
IFRS 15 - Revenue from Contracts with Customers
System Analysis and Design:
Investments: Property, Plant, and Equipment and Intangible Assets
By G NARENDRAN B.COM., ACA.,ACMA., CS
Presentation transcript:

The New Software Accounting Rules-GASB 51

Definitions Software Package: Software purchased or licensed with the software code already written and developed . The useful life must be over 1 year. Internal Use Computer Software - Internal use computer software has both of the following characteristics; the software is acquired, internally developed, or modified solely to meet the entity’s internal needs, and during the software’s development or modification, no substantive plan exists or is being developed to market the software externally. Upgrades and enhancements – Includes modifications to existing internal use software that result in additional functionality – modifications to enable the software to perform tasks that it was previously incapable of performing.

Definitions Estimated Useful Life – The period over which the internal use computer software will be amortized. Given the history of rapid changes in technology, software often has had a relatively short useful life. The State shows a suggested estimated life for software at 5 years. Impairment- In assessing estimated useful life, entities should consider the effects of obsolescence, technology, competition, and other economic factors. If any of these affect the value or useful life of the asset, an asset is considered impaired and should be adjusted in the general ledger. Capitalization thresholds: Packaged Software > $5000 Internal Development Software > $50,000

Timing of Capitalization Determination of system Requirements Development of alternatives Vendor Demonstrations Evaluation of Alternatives Final Selection Software Configuration Software Interface Installation of Hardware Coding Testing Data Conversion Training Costs Maintenance Costs Application Development Stage Post- implementation Stage Preliminary Project Stage EXPENSED CAPITALIZED EXPENSED

Capitalization Occurs When: Preliminary Project Stage is complete. Management authorizes and commits funds It is probable the project will be completed The software will be used to perform the function intended Capitalization ceases when the software project is substantially complete after all testing is completed.

Costs Expensed Internal and external costs incurred during the preliminary project stage Training during all project stages Data conversion costs are normally considered part of the post implementation/operations stage and should be expensed unless they are determined to be necessary to make the computer software operational.

Costs Expensed Internal costs incurred for maintenance or that cannot be reasonably separated between maintenance and minor upgrades. General, administrative and overhead costs Maintenance costs in post implementation/operation stage

Costs Capitalized Internal and external costs incurred to develop internal use computer software during the application development stage. External direct costs of materials and services consumed in developing or obtaining internal use software. Examples include fees paid to third parties for services provided to develop the software during the application development stage, costs incurred to obtain computer software from third parties, and travel expenses incurred by employees in their duties directly associated with developing software.

Costs Capitalized Payroll and payroll-related costs such as benefits for employees who are directly associated with and who devote time to the internal use computer software project, to the extent of the time spent directly on the project. Examples include coding and testing during the application development stage. Interest costs incurred while developing internal use computer software (proprietary fund accounting only – governmental type activities should not capitalize related interest costs).

Purchase Price Where the price of internal use computer software from a third party includes multiple elements such as training, maintenance fees, and data conversion, the entity should allocate the costs among all individual elements. Multi-element arrangements: The allocation should be based on objective evidence of fair value of the elements in the contract, not necessarily separate prices stated within the contract for each element.

Upgrades and Enhancements Modifications to the software to perform tasks that it was not previously capable of performing. If material in relation to project costs, then it should be capitalized as per criteria above. Modules of a base system that are implemented later will be considered a separate asset if it meets the capitalization rules.

Impairment New software should trigger consideration of remaining useful lives of software to be replaced. If development of the software is discontinued the project is impaired and the cost to date should be expensed. When replacing software: unamortized costs should be expensed when the new software is ready for use.

Capital or Non-Capital? Software Quote shows 10 licenses purchased – each is $500. Total PO is $5000. Software Quote shows a package worth $8000. This includes software support. -Support is $1000 -Support is $4000 Purchase order shows a consultant has been hired to help with implementation of a software program $500,000.

89 Account Captures costs as equipment or software is developed through to completion of the project. Types of costs to expense on an 89 account include materials, supplies and salaries consumed directly in developing the product. With Automatic Journal Entries (PRJE’s), the expenses in a 89 roll monthly to the funding account.

89 Accounts 89 : 1100 89 : 5XXX-7XXX 89 : 4800 1. $500 1. $500 1. $500 1. $500 2. $1000 2. $1000 3. $1500 3. $1500 13 : 1100 13: 6224 3. $1500 3. $1500 Expense to Project $500 Another expense to the project $1000 Monthly Automatic Journal Entry (PRJE)

Finished Project Entry 13 : 6224 13: 8260 4. $1500 4. $1500 4. Move Total Project Expenses to Capital Software Object Code

QUESTIONS?????