Lesson: Software Created to be Sold or Licensed

In this lesson, Nick Palazzolo, CPA, delves into the amortization of capitalized software costs, shedding light on product-based amortization methods. He compares the straight-line method with other approaches that resemble percentage of completion or units of production models used in construction and depreciation. Furthermore, Nick clarifies how software created to be sold or licensed is considered inventory, elaborating on the cost capitalization and the point at which these costs become amortized. He also shares insights on inventory reporting, emphasizing the use of the lower of cost or market principle. Illustrating the concept with a relatable example, Nick guides through the phases from initial ideation to technological feasibility, and ultimately to the product release, detailing when and how expenses transition to capitalized costs and then to cost of goods sold.