National Conference on College Cost Accounting

Capitalization Level for Software

  • 1.  Capitalization Level for Software

    Posted 10-16-2018 15:50
    The Uniform Guidance FAQ, accessible via the link below, describes a capitalization level for software on page 9.  In reference to "unit cost", does this mean that if an IHE bought software for $20,000, and there are 400 users of the software, that the unit cost would be $50?  Therefore the software would not need to be capitalized? 
    How are other institutions implementing the software capitalization requirements?

    Tanya Hollis
    Director - Statewide Cost Analysis
    University of Alaska Statewide System of Higher Education


  • 2.  RE: Capitalization Level for Software

    Posted 10-22-2018 16:47
    Our capitalization threshold for purchased software is $100,000 and our experience is that software purchases that fall below the threshold are often "membership" based software and only accessible when/if an annual membership/maintenance/license fee is paid to the vendor. Therefore, the useful life of such software is one year. We do not capitalize software that only has a one year useful life. We do have a rather complicated prepaid expense monitoring system in place and I would expect software purchases/license agreements that lasted for more than one year (say when you first buy a software and they give you 3 years of access as part of the original purchase) to be accounted for as a prepaid expense rather than a capital asset. This interpretation has not been tested by audit.

    Gina Hooten
    Financial Analysis Manager
    Utah State University
    Logan, UT