Lesson: Technological Feasibility: Capitalizing Versus Expensing

In this lesson, Nick Palazzolo, CPA, simplifies the concept of technological feasibility for capitalizing versus expensing software development costs. Grab your pens, because Nick's bringing out a handy chart to break down exactly what costs can be capitalized and what must be expensed, from the planning stages all the way through to software release. He draws a clear line between the valuable coding and testing phases—where capitalization adds to company assets—and the initial planning and post-completion stages, which warrant expensing. Through the example of a company like IBM, Nick illustrates the practical implications of technological feasibility on a company's financials, emphasizing the point at which a project transitions from research and development expense to a capitalized asset that's primed for amortization, and why capitalization can be a strategic financial edge.