| Course | ACC 610 Financial Reporting I |
|---|---|
| Module | Module 8 |
| Paper type | graduate assignment on software, cloud computing and research and development costs |
| Length | About 1,040 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | MS Accounting |
| Updated | October 2026 |
Free sample paper for ACC 610 Module 8
Capitalization of 2025 Software, Cloud and Research Costs
[Student Name]
Southern New Hampshire University
ACC 610: Financial Reporting I
Module Eight Assignment
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Capitalization of 2025 Software, Cloud and Research Costs
Introduction
The company spent about $7.5 million in 2025 developing products and systems, a large share of its budget for a year. The board asked why some of that spending appears as assets on the balance sheet and some as expense. The answer is that U.S. GAAP sorts development costs by what is being built and who will use it, with different stage boundaries for each. This assignment applies those rules to the company's four main projects.
2025 development spending by project
| Project | Governing guidance | Total 2025 cost |
|---|---|---|
| Flight firmware version 4, sold with drones | ASC 985-20 | $2,400,000 |
| Hosted mapping platform, version 3 | ASC 350-40 | $3,100,000 |
| Cloud ERP implementation | ASC 350-40 as amended by ASU 2018-15 | $600,000 |
| Spray nozzle research | ASC 730 | $1,400,000 |
Flight Firmware: Software to Be Sold
The firmware runs on each drone and is sold as part of the product, so it is software to be sold, leased or otherwise marketed under ASC 985-20. Costs before technological feasibility are research and development and are expensed under ASC 730, which carries forward the principle of Statement No. 2 that research and development costs are charged to expense when incurred (Financial Accounting Standards Board, 1974). The company establishes feasibility with a working model, which it reached in September after field trials. From then until general release on December 1, it spent $380,000 on coding and testing, which is capitalized. The other $2,020,000 is expensed. Amortization starts at release and is the greater of the revenue ratio or straight-line over the expected three-year life; straight-line gives $10,556 for December, and the revenue ratio is lower, so straight-line applies.
Aboody and Lev (1998) found that capitalized software amounts were associated with share prices and future earnings, which suggests the capitalized figure carries information. Many companies still expense nearly all such costs because feasibility arrives late, and the company should disclose its policy.
Mapping Platform: Internal-Use Software
Farmers pay a subscription to use the mapping platform, but they cannot download or run it themselves; it is hosted by the company. Under ASC 985-20-15-5 and ASC 350-40-15-4A, software that customers cannot take possession of is not software to be sold, so the company accounts for the platform as internal-use software under ASC 350-40 even though it generates revenue. ASC 350-40 divides costs into three stages: preliminary project, application development and post-implementation. The company spent $400,000 on preliminary work, evaluating map engines and vendors, which is expensed; $2,200,000 on coding, integrating sensor data and testing during application development, which is capitalized; and $500,000 on training, data migration and maintenance after the September 1 launch, which is expensed. The capitalized amount is amortized straight-line over five years from launch, $146,667 for 2025.
Cloud ERP: Implementation of a Service Contract
The company replaced its accounting system with a cloud ERP, paying a $180,000 annual subscription under a three-year noncancelable contract with a two-year renewal it is reasonably certain to exercise. Because the company cannot take the ERP software in house and run it on its own servers, the arrangement is a service contract, and the subscription is an operating expense. ASU 2018-15 requires implementation costs to follow the internal-use software stages (Financial Accounting Standards Board, 2018). Of $600,000 spent, $450,000 for configuration, integration with the drone production system and testing is capitalized; $90,000 of data conversion and $60,000 of training are expensed. The asset is amortized over five years, the term plus the reasonably certain renewal, from go-live on October 1, $22,500 in 2025. It is presented with prepaid expenses or other assets, amortization appears in the same line as the subscription fee and cash payments are operating cash flows.
Nozzle Research: Research and Development
The company is developing a variable-rate spray nozzle. All $1,100,000 of salaries, materials and contract testing in 2025 is research and development and is expensed under ASC 730. Lab equipment costing $300,000, including a wind tunnel and droplet analyzers, can be used for future nozzle and sensor projects. Because it has alternative future uses, it is capitalized and depreciated over five years, and the depreciation, $60,000 for 2025 since it was bought in January, is included in research and development expense (Kieso et al., 2019).
Summary of 2025 Amounts
Capitalized, expensed and amortized in 2025
| Project | Capitalized | Expensed as incurred | 2025 amortization or depreciation |
|---|---|---|---|
| Flight firmware | $380,000 | $2,020,000 | $10,556 |
| Mapping platform | $2,200,000 | $900,000 | $146,667 |
| Cloud ERP | $450,000 | $150,000 | $22,500 |
| Nozzle research | $300,000 | $1,100,000 | $60,000 |
| Total | $3,330,000 | $4,170,000 | $239,723 |
Judgments an Auditor Would Probe
Most of the misstatement risk sits in three judgments, starting with the firmware feasibility date. The company uses a working model as its evidence, and the September field trials produced one, but an auditor would ask whether the model contained all major functions planned for release. If feasibility were pushed to October, capitalized cost would fall to about $210,000. The second is the line between application development and post-implementation work on the mapping platform. Bug fixes and small features after launch are maintenance and should be expensed; only upgrades that add new functions qualify for capitalization. The company's time-tracking codes separate these, and the auditor will test a sample of engineers' hours against them. The third is the cloud renewal. Amortizing over five years rather than three lowers 2025 expense, so the company should document why renewal is reasonably certain, here the cost of migrating production data and the vendor's price cap for the renewal term.
Effect on Reported Results
Capitalizing $3.03 million of software and cloud costs, rather than expensing them, raised 2025 operating income by about $2.85 million after this year's amortization. That gap will narrow as amortization builds over the next five years. Because the company's lenders measure operating cash flow, the choice also matters there: capitalized internal-use software and firmware are investing outflows, while cloud implementation payments remain operating outflows, a difference the board should understand before comparing the company with peers that buy rather than build.
Conclusion
The notes should state the policy for each category, the capitalized software balances and amortization, the cloud implementation asset and the amount of research and development expensed. The board's question has a principled answer: costs become assets only after a project passes a stage where future benefit is reasonably assured, and that stage differs by what is being built.
References
Aboody, D., & Lev, B. (1998). The value relevance of intangibles: The case of software capitalization. Journal of Accounting Research, 36, 161-191. https://doi.org/10.2307/2491312
Financial Accounting Standards Board. (1974). Accounting for research and development costs (Statement of Financial Accounting Standards No. 2). Author.
Financial Accounting Standards Board. (2018). Intangibles: Goodwill and other: Internal-use software (Subtopic 350-40): Customer's accounting for implementation costs incurred in a cloud computing arrangement that is a service contract (Accounting Standards Update No. 2018-15). Author.
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate accounting (17th ed.). Wiley.
What the ACC 610 Module 8 instructions ask for
The Module Eight assignment in ACC 610 usually asks you to decide how a company should account for internally developed intangibles and related costs. Plan to identify which standard governs each cost: ASC 730 for research and development, ASC 985-20 for software to be sold, leased or marketed, ASC 350-40 for internal-use software and ASU 2018-15 for implementation costs of cloud computing arrangements that are service contracts. Most versions provide cost data by project stage and ask for the amounts capitalized, expensed and amortized, with journal entries. Explain the stage boundaries, such as technological feasibility or the end of the preliminary project stage, since they drive the numbers, and state the evidence that a boundary was crossed.
How this ACC 610 Module 8 intangible assets assignment example is built
The paper sorts four projects. Flight firmware sold with the drones falls under ASC 985-20; of $2.4 million spent, only $380,000 incurred between technological feasibility in September and general release on December 1 is capitalized. The mapping platform customers access but never possess is internal-use software, so $2.2 million of application development costs is capitalized and amortized over five years. The cloud ERP is a service contract, so $450,000 of configuration costs is capitalized as a prepaid-type asset and amortized over five years including a likely renewal. Nozzle research of $1.1 million is expensed, while $300,000 of lab equipment with other uses is capitalized and depreciated. A closing table reconciles $3.33 million capitalized and $4.17 million expensed.
Where the ACC 610 Module 8 rubric puts the points
Rubrics for the intangible assets assignment typically score identification of the governing standard, the stage analysis, computation of capitalized, expensed and amortized amounts, presentation, journal entries and Codification support. Top papers explain why a hosted platform is internal-use software even though customers pay for it, distinguish the cloud arrangement from a software license and apply the amortization rules for each category correctly. Graders also reward noting presentation details, such as where cloud implementation amortization appears and how the related cash flows are classified. Common deductions include applying one standard to every project, capitalizing preliminary stage costs, capitalizing training and data conversion and treating research equipment as an expense when it has other uses.
ACC 610 Module 8 help: the mistakes that cost points
Intangibles papers most often slip by applying ASC 985-20 to software that customers only access through the internet; if the customer cannot take possession, the vendor accounts for it as internal-use software. A second weak spot is cloud ERP costs, where students either expense everything or capitalize the subscription itself. If your assignment includes acquired intangibles or in-process research and development from an acquisition, different rules apply, and those are measured at fair value. Build a table with each project's stages and costs before writing the analysis; it makes the boundary between capitalized and expensed amounts easy to check, and it shows the grader you sorted costs before computing anything.
Get ACC 610 Module 8 written to your instructions
Send the ACC 610 Module 8 assignment and the cost data. The paper will identify the right standard for each project, split costs by stage, compute the capitalized and amortized amounts and support each choice with Codification references. The first is free; plan on about two days. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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ACC 610 Module 8 questions, answered
Where can I find a free ACC 610 Module 8 Intangible Assets Assignment sample?
This page includes a full ACC 610 Module 8 assignment on firmware, a hosted platform, cloud ERP implementation and research costs.
When is software to be sold capitalized under ASC 985-20?
Costs are expensed as research and development until technological feasibility is established; costs from then until the product is available for general release are capitalized.
Which internal-use software costs are capitalized?
Costs in the application development stage, such as coding and testing; preliminary project stage costs and post-implementation costs like training and maintenance are expensed.
How are cloud computing implementation costs handled?
Under ASU 2018-15, implementation costs of a hosting arrangement that is a service contract follow the internal-use software stages; capitalized amounts are amortized over the term including reasonably certain renewals.
Is equipment used in research expensed?
Only if it has no alternative future use; equipment that can be used in other projects is capitalized and its depreciation is charged to research and development.