GUIDELINES FOR ACCOUNTING RELATED TO COSTS OF COMPUTER
SOFTWARE DEVELOPMENT
Accounting for Costs of Computer Software Developed
Or Obtained for Internal Use
A.
Background:
Required by Accounting Rules (SOP 98-1) beginning in fiscal 2000, new accounting
regulations require that certain costs associated with computer software obtained or
developed for internal use be expensed while others be capitalized. Internal use software
is any software acquired, internally developed, or modified to meet the Institutes internal
needs, with no intention of marketing the software externally. MIT will be required to
track the cost of software development projects to meet the following objectives:
• For compliance with accounting rules, software development projects that are
expected to incur total capital costs over the life of the project that meet or exceed
the capitalization threshold of $250,000
• For MIT management purposes, software development projects that are expected
to incur total costs over the life of the project that meet or exceed $250,000
B. Identification of a Software Project
The Vice President for Information Systems and Technology (IS&T) will be responsible
for communicating to the Controllers Accounting Office (CAO) new projects whose total
cost is expected to meet or exceed $250,000. All departments that are planning to
embark on a software development project should ensure that the office of the VP of
IS&T is notified about the details of the project to determine if the capitalized software
rules will apply. Once a determination is made, the VP of IS&T will communicate the
initiation of a qualified software project to CAO and the participating department(s) via
e-mail. This e-mail will include such specific project information as the scope,
sponsor(s) and project manager.
Once the project has been identified, CAO and the Budget Office (OBFP) will work
together to orient the sponsors, project manager, and department administrators on the
software ca