ASC 720-45: Business and Technology Reengineering
ASC 720-45 governs the accounting for business-process and technology reengineering costs — which are expensed, even when bundled into a software project.
In plain terms: when a company overhauls how it works — redesigning processes and the systems behind them — ASC 720-45 says the reengineering effort itself is an operating expense, not an asset.
ASC 720-45 (Other Expenses — Business and Technology Reengineering) addresses costs incurred during process-reengineering projects, including those bundled with software development or system integration. The core rule: the cost of the reengineering activity itself — process analysis, redesign, change management, training — is expensed as incurred, even when a third party performs it as part of a larger software project.
Software and system-integration costs in the same project follow their own standard — internal-use software is covered by ASC 350-40 — so a single initiative often splits: the software that builds a lasting asset can be capitalized, while the reengineering work around it is expensed.
See also: the software capitalization guide.
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