ACG 3141 - Writing Assignment – Software Costs

Creative Software is a firm that recently completed the development and testing of a new software program that provides the ability to transfer data to and from a variety of operating systems. The firm believes this product will be quite successful and has capitalized all of the costs of designing, developing, coding, and testing the software.  Michael Leon, the President of Creative Software, located at 3200 Tech Avenue, Davie FL 33314 is your client.  You are a newly hired staff member of FAU, Inc., an accounting firm located at 777 Glades Road, Boca Raton, FL 33431.  Because Michael is unfamiliar with the proper accounting treatment of software costs according to United States Generally Accepted Accounting Principles (US GAAP) he has hired FAU, Inc. to explain the accounting treatments specified by US GAAP.  (Adapted & Modified from SST 4th Edition)

Your firm has delegated to you the task of determining the treatment of software costs, and has asked that you prepare a four (4) page typed memo (not handwritten, 1.5 spacing -- not double spaced), including a works cited page (the 4th page of your memo should be designated as the works cited page; use MLA Format for your works cited page) to the client explaining  

1. The standards that govern US GAAP treatment of software costs.

2. Whether Creative Software was correct in its treatment of the software development costs and why Creative Software’s treatment was correct or incorrect.

3. Explain the appropriate methods for determining the amount of periodic amortization for any capitalized software development costs.

4. Explain how software costs should be presented and disclosed in the financial statements.

In addition, you are to formulate a question to ask the client that would help you determine the different types of software transaction(s) it is involved in, and include that in the conclusion of your memo.  

This memo is expected to be professional and informative.  Remember the purpose of the memo and the audience that it is addressing.  

Follow the proper format for a memo, as presented in May & May, Effective Writing: A Handbook for Accountants. 10th ed.  I will allow sub-headings in your memo.

Hint:  I suggest you start by reading pages 559-562 (Chapter 10) in your textbook to help guide you on how to conduct your research.  

Remember to include headings, a proper introduction that previews your headings, and a conclusion.  When citing sources within your memo and preparing a works cited page, please follow the formats illustrated in the May & May text on pages 162-164.  Please be sure to prepare your memo according to the proper format for a memo, as presented in May & May, Effective Writing: A Handbook for Accountants.  You may include tables and / or vertical enumerated points to illustrate the information you are providing to your client.  

IMPORTANT WARNING:  If your writing assignment score includes 3 or more of the student learning outcomes in the Developing category, most likely you will fail this assignment.

Research Hints

Effective July 1, 2009, the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) is the official guidance regarding GAAP.  You can locate the Codification at http://aaahq.org/ascLogin.cfm

Note:  You will be required to enter the following User Name and password to gain access to the Codification.  

User Name: AAA51093

Password:   ZVb3K9U

Note:  You are to use the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) as one of your main source(s) for this writing assignment.  Failure to use the FASB ASC will result in you not being awarded full points on your writing assignment, which may result in your failing the assignment.  See FASB ASC Citing Hints on the next page.

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FASB ASC Citing Hints

The FASB ASC system is broken down as follows:

Topic  XXX

Subtopic XX

Section  XX

Paragraph XX

So if you were to reference 410-20-25-5, Asset Retirement and Environmental Obligations, you are telling the reader that you located your information in the FASB ASC under:  

Topic  410

Subtopic 20

Section  25

Paragraph 5

The following example is acceptable when citing the FASB ASC in my class.  

The initial recording of an asset retirement obligation (ARO) requires the capitalization of asset retirement costs, by increasing the book value of the related asset by the same amount of the ARO liability recorded (FASB ASC 410-20-25-5).

When preparing your Works Cited page, the following is acceptable for my class when referencing the FASB ASC.  

Example:

Financial  Accounting Standards Board (FASB), XXXX. Accounting Standards Codification™.

  Stamford, Conn.: FASB.  

Note:  The XXXX above represents the Year you consulted/accessed the FASB Accounting Standards Codification (ASC).  On your memo since you are consulting the FASB ASC in 2014 your reference on your Works Cited page would be as follows:

Financial Accounting Standards Board (FASB), 2014. Accounting Standards Codification™.

  Stamford, Conn.: FASB.