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Capitalizing external IT costs to switch from Exchange to Google?

We switched from Microsoft Exchange/Outlook to Google mail: can we capitalize the external costs of implementing the switch; external IT services?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Why would you capitalize the costs?

IMHO it is a maintenance type expense.

Would you capitalize upgrading Exchange X or Exchange Y?

Chris Herbert
Title: CMO
Company: Mi6
LinkedIn Profile
(CMO, Mi6) |

Do CFO and/or CTOs prefer to buy the hardware and software to put it on the books as an asset and write it off? I've heard this in the past as a reason why they don't buy cloud related services and/or managed services.

Bruce Ficks
Title: CFO
Company: Value Financial Group
(CFO, Value Financial Group) |

Wayne, I would tend to agree with you, however, I am trying to counter an argument to capitalize the costs. Someone heard that a company is capitalizing the costs to get NetSuite up and running and want to know why I said converting to Gmail/Google Apps is different.

James Quinlan
Title: Partner
Company: Corporate Finance Group, inc.
(Partner, Corporate Finance Group, inc.) |

In some instances you would be able to capitalize costs related to the change in the platform. There are specific rules around accounting for internally developed software of what you can and cannot capitalize.

Bruce Ficks
Title: CFO
Company: Value Financial Group
(CFO, Value Financial Group) |

How about capitalizing costs related to getting SaaS software ready for use? Software, such as Google Mail/Apps or NetSuite?

Topic Expert
Brenda Morris
Title: Board of Directors, Audit Committee Chai..
Company: Boot Barn
(Board of Directors, Audit Committee Chair, Boot Barn) |

It has to all be expensed since you are not the "owner" therefore the software is not an asset but monthly subscription expense and the related implementation expenses also get expensed. If anyone has a solid arguement on capitalizing Saas related expenses I would love to know it! Good luck, Brenda

Bruce Ficks
Title: CFO
Company: Value Financial Group
(CFO, Value Financial Group) |

Thanks Brenda. Expensing the costs is certainly the straightforward answer. I am looking forward as well to see if anyone has an argument on capitalizing SaaS related costs.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I have to agree with Brenda that you don't own it and never will versus the changes in accounting for most leases whether FMV or $1 buy-back because there is the possibility that you can own it.

Manuel Soberanes
Title: Senior Revenue Accountant
Company: Soberanes Consulting
LinkedIn Profile
(Senior Revenue Accountant, Soberanes Consulting) |

isn't a subscription to software in essence a leased intangible asset? and shouldn't the lease guidance be used to appropriately record it as a capital lease or operating lease, lets say if you are implementing the software and doing some significant customization then if you plan on using the software over a significant period of its economic life (90%) then it would be one of the criteria for capitalizing the lease agreement and that includes any up front fees you pay such as, setup and implementation. ultimately you don't need to own a leased asset in order to capitalize it. any thoughts on this? also would love to know what guidance the company that capitalized their NetSuite implementation costs used, referenced by Bruce in this thread.

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