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Facilitating SOP 98-1 for Software Development Capitalization

Organizations pursuing software development capitalization under SOP 98-1 guidelines can facilitate their efforts with TrackerSuite.Net.

TrackerSuite.Net is an integrated suite of Web based applications that simplifies compliance with SOP 98-1 guidelines for internal software projects, with solutions for project management, time and expense reporting, purchasing and payment requests that provide a structured environment that facilitate the capitalization of internal software projects, through:

  • Configuring projects and tasks to identify and separate capital vs. non-capital budgets and work.
  • Flagging financial items that can be capitalized.
  • Real time reports on capitalization efforts, as well as measuring the efficiency of internal software assets against the performance of business processes they support.

As well as SOP 98-1, it can also be utilized to capture R&D tax credits for organizations whose R&D is outpacing their growth in revenue.

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Managing Internal Software Projects

TrackerSuite.Net facilitates the management and capitalization of internal software development projects by simplifying workflows, budget management and the tracking of capital and non-capital labor:

ITrackerSuite.Net simplifies the tracking of labor costs and expenses for internal software projects through its applications for time and expense reporting, and purchasing:

Finally, TrackerSuite.Net provides comprehensive reports on project costs and simplifies the measurement of results through its Web based reporting engine, the Tracker Data Warehouse:

Configure budgets with capital and non-capital allotments

Configure Capital and Non-Capital Project Budgets

Assign capital or non-capital account codes to tasks

Identify Capital Labor with Account Codes

Under SOP 98-1, companies are required to capitalize the costs associated with developing or purchasing software designated for internal use. Only certain costs may be capitalized, and only within particular stages of the internal software development project.

For example, the preliminary stage of an internal software project typically involves research of the technology to build the software. All incurred costs for research activity must be expensed, as they are not considered a direct cost of the software’s development.

Once the project moves into actual development, costs may be capitalized, but only external direct costs of materials and services utilized in developing or purchasing the software, not costs such as overhead. If the organization contracts outside developers for the project, it may capitalize the payroll (and certain payroll-related costs) for those developers, but not their living expenses such as housing or vehicle rentals.

If the organization chooses to purchase the software instead of developing it, they can only capitalize the actual software. Other costs, such as training, maintenance, typical data conversion routines, unspecified upgrades and re-engineering should be expensed as they are incurred.

Complying with SOP 98-1 offers organizations a means to improve the way they manage information technology, to clarify its value and capabilities on an ongoing basis, and encourage a review of existing software assets and their performance. In this regard it often dovetails with an organization’s Sarbanes Oxley / Purchase to Pay initiatives, providing justification for procuring software or development services for internal projects.