My client is implementing a cloud based (SaaS ) financial system and wants to capitalize the implementation costs under the computer software developed or obtained for internal use rules (ASC 350-40). Since the costs to design and install the underlying asset (e.g. software) doesn't reside on the balance sheet under the SaaS model, I believe they need to expense these costs. Under the SaaS model, the company is renting a service vs. software licensing is purchasing an asset. So if the client was implementing a traditional ERP solution (e.g. Oracle, Great Plains) they could capitalize the implementation costs but if they implement a SaaS solutions (e.g. Netsuite) they would need to expense. Would appreciate feedback from anyone who has experience with this issue or if their auditors have provide guidance on treatment.