ASC 985-20: Software to Be Sold
ASC 985-20 is the U.S. GAAP standard for capitalizing the cost of software you build to sell, lease, or market — keyed to technological feasibility.
In plain terms: if you build software to sell, lease, or license to customers, ASC 985-20 says you can’t capitalize development costs until the product is technically proven. Before that, it’s research.
ASC 985-20 (Software — Costs of Software to Be Sold, Leased, or Marketed) hinges on technological feasibility. All development costs incurred before technological feasibility is established are research and development, expensed as incurred. Once it’s established — evidenced by a completed detailed program design, or a working model confirmed through testing — coding and testing costs are capitalized, until the product is available for general release.
This is the counterpart to ASC 350-40, which covers software built for internal use rather than for sale.
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