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Accounting for Costs of Computer Software Developed or Obtained for Internal Use

POLICY STATEMENT

The AICPA’s Statement of Position (SOP) 98-1 requires 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 University’s internal needs, with no intention of marketing the software externally. At Columbia University, software development projects that are expected to meet or exceed the threshold of $250,000 are subject to this policy and project costs must be tracked in accordance to ensure compliance.

REASON FOR POLICY

This policy describes the types of costs that should be capitalized and those that should be expensed and illustrates the correct FAS accounting structure to follow.

WHO IS GOVERNED BY THIS POLICY

Any University employee who is responsible for purchases of goods or services, requests payment for purchases, and/or responsible for allocation of payroll charges that are related to software development projects.