Until recently, most organizations that purchased and implemented a new accounting system would capitalize the costs associated with the application development stage of implementing the new system.
They could do this if the organization physically bought the software via a multiyear license and support arrangement. For book purposes, this allowed an organization to recognize the cost of the implementation (which could be in the millions) over many years, reducing the project’s cost on any one year’s income statement.
Depending on the nature of the implementation, companies may have also capitalized the implementation expense for tax purposes, or they may have deducted at least a portion of the implementation expense as a software development expense in the year the expense was incurred.
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