{"id":589,"date":"2020-10-12T14:00:10","date_gmt":"2020-10-12T08:30:10","guid":{"rendered":"https:\/\/qalbit.com\/?p=589"},"modified":"2026-09-04T20:57:48","modified_gmt":"2026-09-04T15:27:48","slug":"can-website-development-be-capitalized","status":"publish","type":"post","link":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/","title":{"rendered":"Capitalise or Expense: Accounting for Website and Software Development Costs"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Some of it goes on the balance sheet. Most of the rest doesn&#8217;t. Which bucket a line item lands in depends on three things: what the work actually was, when in the project it happened, and which rulebook your accounts follow. Under both US GAAP and IFRS, the money spent building working functionality can usually be capitalised. The money spent deciding what to build, writing the copy, training the team, and keeping the thing alive afterwards usually cannot.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That&#8217;s the short answer. The rest of this explains how to defend it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>(US readers search this as &#8220;capitalize.&#8221; Same question, same answer \u2014 we&#8217;ve used the British spelling throughout because most of our clients are outside the US.)<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why this post exists, and why it was wrong until now<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">We&#8217;re a software development studio. We send the invoices that trigger this question. Roughly once a quarter, a client&#8217;s finance lead emails us asking whether they can capitalise our last three invoices, and what documentation they&#8217;ll need when the auditor asks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Every page ranking on Google for this question is written by an accounting firm. That&#8217;s useful, but it&#8217;s the view from the other side of the table. Nobody writing about this has actually had to reconstruct, eighteen months later, which sprint a particular workstream belonged to.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This post was first published in 2020. It was accurate then. It is not accurate now, and we&#8217;ve rewritten it from scratch rather than patching it, because two of the rules underneath it have been replaced. If you read the old version and acted on it, the &#8220;spread your website costs over three years&#8221; advice in particular is obsolete \u2014 see the corrections note at the end.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>This is guidance, not advice.<\/strong> It will get you to a well-informed conversation with your controller or auditor. It does not replace one. The judgements below are genuinely judgements, and your auditor&#8217;s view of your specific facts is the one that counts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What changed in the last 24 months<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Three things, and all three matter.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>1. FASB replaced the three-stage model for internal-use software.<\/strong> On 18 September 2025, FASB issued <strong>ASU 2025-06<\/strong>, <em>Intangibles \u2014 Goodwill and Other \u2014 Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software<\/em>. It removes every reference to project stages from ASC 350-40 and <strong>supersedes ASC 350-50 (Website Development Costs) entirely<\/strong>, folding website guidance into ASC 350-40. If you have ever seen the &#8220;preliminary project stage \/ application development stage \/ post-implementation stage&#8221; diagram, that diagram is on its way out. (<a href=\"https:\/\/www.fasb.org\/\">FASB<\/a>; summarised at <a href=\"https:\/\/dart.deloitte.com\/USDART\/home\/news\/all-news\/2025\/sep\/fasb-amends-guidance-on-software-costs\">Deloitte DART<\/a>, 18 September 2025.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>2. The US restored immediate tax deduction for domestic software development.<\/strong> The One Big Beautiful Bill Act, signed 4 July 2025, created <strong>IRC \u00a7174A<\/strong>, allowing domestic research and experimental expenditure \u2014 which includes software development \u2014 to be deducted in the year incurred, for tax years beginning after 31 December 2024. Foreign development still amortises over 15 years under \u00a7174. (<a href=\"https:\/\/www.irs.gov\/\">IRS<\/a>; procedural guidance in Rev. Proc. 2025-28, released 29 August 2025.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>3. The UK collapsed its two R&amp;D schemes into one.<\/strong> The merged RDEC scheme \u2014 a 20% above-the-line expenditure credit \u2014 applies to accounting periods beginning on or after <strong>1 April 2024<\/strong>. (<a href=\"https:\/\/www.gov.uk\/guidance\/corporation-tax-research-and-development-rd-relief\">GOV.UK<\/a>.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Most of the content ranking for this question predates at least one of these.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The bit everyone gets wrong first: book is not tax<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Before any of the rules, get this straight, because half the confusion in this topic comes from mixing the two.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Book treatment<\/strong> is what appears in your financial statements \u2014 the accounts your investors, lenders and auditors read. It&#8217;s governed by US GAAP or IFRS.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Tax treatment<\/strong> is what appears on your tax return. It&#8217;s governed by the tax code of each country you file in.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They are different systems answering different questions, and they routinely disagree about the same invoice. In the US right now they disagree quite dramatically: under \u00a7174A you can deduct domestic software development immediately on the tax return, while ASC 350-40 still requires you to capitalise qualifying development costs in the accounts.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That gap is a <strong>temporary difference<\/strong>, not a permanent one. The total deduction over the asset&#8217;s life is the same either way \u2014 only the timing differs \u2014 so it generates a deferred tax liability rather than a permanent saving. Your accountant will handle the mechanics. Your job is to not assume that &#8220;my accountant expensed it for tax&#8221; means &#8220;it&#8217;s expensed.&#8221;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">US GAAP: what the rules say now, and what they said until recently<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Three codification topics govern software costs in US GAAP, and which one applies depends on what you&#8217;re building it for.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>What you&#8217;re building<\/th><th>Topic<\/th><th>When capitalisation starts<\/th><\/tr><\/thead><tbody><tr><td>Software for your own internal use, including your website<\/td><td>ASC 350-40 (as amended by ASU 2025-06)<\/td><td>Management commits funding <em>and<\/em> completion is probable<\/td><\/tr><tr><td>Software you sell, license or market to customers<\/td><td>ASC 985-20<\/td><td>Technological feasibility is established<\/td><\/tr><tr><td>Implementation of someone else&#8217;s cloud\/SaaS product<\/td><td>ASC 350-40 hosting provisions (from ASU 2018-15)<\/td><td>Same threshold as internal-use software<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Internal-use software and websites: the old model<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Until ASU 2025-06 takes effect, ASC 350-40 splits a project into three stages:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Preliminary project stage<\/strong> \u2014 evaluating alternatives, choosing vendors, deciding what to build. <strong>Expensed.<\/strong><\/li>\n\n\n\n<li><strong>Application development stage<\/strong> \u2014 coding, configuring, installing hardware, testing. <strong>Capitalised.<\/strong><\/li>\n\n\n\n<li><strong>Post-implementation and operation stage<\/strong> \u2014 training, maintenance, running the thing. <strong>Expensed.<\/strong><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Capitalisation began when the preliminary stage finished <em>and<\/em> it was probable the project would be completed and used as intended.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Internal-use software and websites: the new model<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">ASU 2025-06 throws out the stages. Under amended ASC 350-40-25-12, capitalisation begins when both of these are true:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Management with the relevant authority authorises and commits to funding<\/strong> the software project \u2014 implicitly or explicitly; and<\/li>\n\n\n\n<li><strong>It is probable the project will be completed and the software will be used to perform the function intended.<\/strong> FASB calls this the <em>probable-to-complete recognition threshold<\/em>.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Then there&#8217;s a brake. New paragraph <strong>ASC 350-40-25-12A<\/strong> blocks capitalisation \u2014 costs keep going to the income statement \u2014 if there is <strong>significant development uncertainty<\/strong>. That exists when either:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>the software has technological innovations or novel, unique or unproven functions or features, and the uncertainty about them has not been resolved through coding and testing; or<\/li>\n\n\n\n<li>significant performance requirements have not been identified, or are still subject to substantial revision.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Read the first of those twice if you&#8217;re building anything AI-shaped. FASB expects it to push more costs into expense, not fewer. Several firms reviewing the ASU have flagged the same thing \u2014 <a href=\"https:\/\/www.pkfod.com\/insights\/fasbs-internal-use-software-guidance-what-companies-need-to-know\/\">PKF O&#8217;Connor Davies<\/a> notes it is possible to see more costs expensed, and <a href=\"https:\/\/www.forvismazars.us\/forsights\/2025\/12\/fasb-s-improvements-to-accounting-for-internal-use-software\">Forvis Mazars<\/a> expects a decrease in capitalisation on SaaS arrangements. <em>(Both are firm interpretations of the standard, not the standard itself.)<\/em><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/software-development-capitalisation-window-timeline-1-1024x576.webp\" alt=\"Project timeline showing the capitalisation window opening after funding is committed and closing at launch\" class=\"wp-image-3487\" srcset=\"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/software-development-capitalisation-window-timeline-1-1024x576.webp 1024w, https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/software-development-capitalisation-window-timeline-1-300x169.webp 300w, https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/software-development-capitalisation-window-timeline-1-768x432.webp 768w, https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/software-development-capitalisation-window-timeline-1-1536x864.webp 1536w, https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/software-development-capitalisation-window-timeline-1.webp 1672w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">Which model applies to you, today<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Both are live, depending on when you adopt.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">ASU 2025-06 is effective for annual reporting periods beginning after <strong>15 December 2027<\/strong>, including interim periods within those years, for all entities. Early adoption is permitted where financial statements have not yet been issued. Three transition methods are available: prospective, modified prospective, and retrospective. (ASC 350-40-65-4.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So if your financial year begins in January, the mandatory date is your FY2028. Until you adopt, the stage model still governs. A lot of content published in the last twelve months gets this wrong in one direction or the other \u2014 either presenting the new rule as if it were already mandatory, or ignoring it entirely.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Software you sell to customers<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">ASC 985-20 is untouched by ASU 2025-06. It uses a different and generally later trigger: <strong>technological feasibility<\/strong>, which under ASC 985-20-25-2 is established when you have completed all planning, designing, coding and testing activities necessary to establish that the product can be produced to meet its design specifications. Everything before that point is research and development expense. Capitalisation stops at general release.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In practice this means product companies capitalise a narrow slice \u2014 often close to nothing \u2014 because feasibility frequently isn&#8217;t established until shortly before shipping. If you&#8217;re building a <a href=\"\/services\/saas\/\" data-type=\"link\" data-id=\"\/services\/saas\/\">SaaS product<\/a>, this is the topic that governs you, not 350-40.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">IFRS: IAS 38 and SIC-32<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">IFRS has no equivalent of the stage model. It has one standard for intangible assets and one interpretation specifically about websites.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>IAS 38<\/strong> splits every project into a research phase and a development phase.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Research is always expensed.<\/strong> IAS 38.54 is unambiguous: no intangible asset arising from research shall be recognised. Investigating alternatives, evaluating technologies, exploring what&#8217;s possible \u2014 all expense, always.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Development is capitalised if \u2014 and only if \u2014 all six criteria in IAS 38.57 are met:<\/strong><\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Technical feasibility of completing it<\/li>\n\n\n\n<li>Intention to complete and use or sell it<\/li>\n\n\n\n<li>Ability to use or sell it<\/li>\n\n\n\n<li>How it will generate probable future economic benefits<\/li>\n\n\n\n<li>Adequate technical, financial and other resources to complete it<\/li>\n\n\n\n<li>Ability to measure the expenditure reliably<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Note the wording: once all six are met, capitalisation is <strong>mandatory<\/strong>, not optional. This is a real difference from what many people assume, and a real difference from UK FRS 102, where capitalising development costs is an accounting policy choice, and FRS 105 (micro-entities), where it is prohibited outright.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">IAS 38 also bans capitalising some things outright, regardless of how much you spent: internally generated brands, mastheads, publishing titles, customer lists, and internally generated goodwill.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>SIC-32<\/strong> applies IAS 38 specifically to website costs and remains in force (effective 25 March 2002). It maps a website project to IAS 38&#8217;s phases \u2014 planning is research and gets expensed; application and infrastructure development, graphical design and content development can be capitalised where the IAS 38.57 criteria are met; the operating stage is expensed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And then it drops the sentence that catches out most companies:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><strong>All expenditure on developing a website solely or primarily for promoting and advertising the entity&#8217;s own products and services is recognised as an expense when incurred.<\/strong><\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">If your new site is a marketing site \u2014 brochure pages, case studies, a contact form \u2014 SIC-32 says the whole build is an expense under IFRS. Not part of it. All of it. That is a materially different answer from US GAAP on identical facts, and it is the single most common IFRS mistake we see on website projects. (<a href=\"https:\/\/www.ifrs.org\/issued-standards\/list-of-standards\/sic-32-intangible-assets-web-site-costs\/\">IFRS Foundation, SIC-32<\/a>.)<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Cloud and SaaS implementation costs: where the frameworks split hardest<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">You&#8217;re not buying software. You&#8217;re buying access to software someone else runs. So what happens to the $40,000 you paid a partner to configure it, migrate your data and integrate it with your ERP?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Under US GAAP<\/strong>, ASU 2018-15 added hosting-arrangement provisions to ASC 350-40. Implementation costs in a hosting arrangement that is a service contract are assessed using the internal-use software model \u2014 qualifying costs are capitalised. But the presentation is unusual and worth knowing:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The capitalised asset is presented <strong>in the same balance sheet line as a prepayment of the hosting fees<\/strong> (ASC 350-40-45-2) \u2014 not as an intangible asset.<\/li>\n\n\n\n<li>It is amortised over the term of the hosting arrangement.<\/li>\n\n\n\n<li>The amortisation charge goes on the <strong>same income statement line as the hosting fee itself<\/strong> (ASC 350-40-45-1) \u2014 not in depreciation and amortisation.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">That last point surprises people. It means capitalising SaaS implementation costs does not improve your EBITDA, because the amortisation sits above the line with the subscription cost.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Under IFRS<\/strong>, the answer is mostly the opposite. The IFRS Interpretations Committee published an agenda decision in <strong>March 2021<\/strong> on configuration and customisation costs in a SaaS arrangement. In the typical fact pattern, the customer does not control any software, so <strong>no intangible asset is recognised and the costs are expensed<\/strong>. There are two narrow exceptions: where the work genuinely creates a separate resource the customer controls (a piece of code you own and could run elsewhere), and where the supplier performs configuration services that are not distinct from the access itself, in which case the cost is recognised over the SaaS term. The IASB did not object to the decision in April 2021, which gives it authoritative weight. (<a href=\"https:\/\/www.ifrs.org\/\">IFRS Foundation<\/a>.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>The practical upshot:<\/strong> an identical ERP or CRM rollout produces a capitalised asset under US GAAP and an expense under IFRS. If you report under both \u2014 or if your group reports IFRS and your US subsidiary reports GAAP \u2014 you need two sets of numbers from the same project. Tell your implementation partner that before the project starts, not after.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">US GAAP vs IFRS at a glance<\/h2>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Question<\/th><th>US GAAP<\/th><th>IFRS<\/th><\/tr><\/thead><tbody><tr><td>Governing guidance for internal software and websites<\/td><td>ASC 350-40 (ASC 350-50 superseded by ASU 2025-06)<\/td><td>IAS 38, applied to websites via SIC-32<\/td><\/tr><tr><td>Capitalisation trigger<\/td><td>Funding committed + probable-to-complete, with no significant development uncertainty<\/td><td>All six IAS 38.57 development criteria met<\/td><\/tr><tr><td>Is capitalisation optional?<\/td><td>No \u2014 required when criteria met<\/td><td>No \u2014 required when criteria met (but a policy choice under UK FRS 102, prohibited under FRS 105)<\/td><\/tr><tr><td>Purely promotional \/ marketing website<\/td><td>Assessed on the same criteria as any other internal-use software<\/td><td>Expensed in full \u2014 SIC-32 is explicit<\/td><\/tr><tr><td>SaaS configuration and customisation<\/td><td>Capitalised as a prepayment-style asset; amortised over the hosting term<\/td><td>Generally expensed as incurred (IFRIC agenda decision, March 2021)<\/td><\/tr><tr><td>Where the SaaS amortisation sits<\/td><td>Same income statement line as the hosting fee, not in D&amp;A<\/td><td>N\/A in most cases \u2014 expensed as incurred<\/td><\/tr><tr><td>Software built to sell to customers<\/td><td>ASC 985-20 \u2014 capitalise only after technological feasibility<\/td><td>Same IAS 38 development criteria; no separate standard<\/td><\/tr><tr><td>Research phase costs<\/td><td>Preliminary\/uncertain-stage costs expensed<\/td><td>Always expensed (IAS 38.54)<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">The decision framework: run this on your invoice<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Take the actual line items and walk each one through three questions.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"768\" src=\"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-expense-decision-framework-1-1024x768.webp\" alt=\"Three-gate decision flow showing when a development cost is capitalised versus expensed on the income statement\" class=\"wp-image-3486\" srcset=\"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-expense-decision-framework-1-1024x768.webp 1024w, https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-expense-decision-framework-1-300x225.webp 300w, https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-expense-decision-framework-1-768x576.webp 768w, https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-expense-decision-framework-1.webp 1448w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Question 1 \u2014 What kind of software is this?<\/strong> Internal use or your own website \u2192 ASC 350-40 \/ IAS 38 + SIC-32. Something you&#8217;ll sell or license \u2192 ASC 985-20 \/ IAS 38. Someone else&#8217;s hosted product you&#8217;re configuring \u2192 ASC 350-40 hosting provisions \/ IFRIC 2021.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Question 2 \u2014 Had the project cleared the threshold when this cost was incurred?<\/strong> Under US GAAP: was funding committed and completion probable, with no significant development uncertainty outstanding? (Or, if you haven&#8217;t adopted ASU 2025-06 yet: was the preliminary stage complete?) Under IFRS: were all six IAS 38.57 criteria satisfied? If no \u2014 expense it, no matter what the work was.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Question 3 \u2014 Is this cost of a type that can be capitalised at all?<\/strong> Some costs are permanently excluded regardless of timing. Training is never capitalised. General and administrative overhead is never capitalised. Data conversion costs are expensed. Under IFRS, anything on a solely-promotional website is expensed no matter when it happened.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Only a &#8220;yes&#8221; at all three gates puts it on the balance sheet.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Line-by-line: what actually happens to each cost<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">This is the table to send your finance team.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Cost<\/th><th>US GAAP (internal use \/ website)<\/th><th>IFRS<\/th><th>Why<\/th><\/tr><\/thead><tbody><tr><td>Discovery workshops, requirements gathering, vendor selection<\/td><td>Expense<\/td><td>Expense<\/td><td>Research \/ pre-threshold \u2014 you&#8217;re still deciding what to build<\/td><\/tr><tr><td>Coding the application, back end and front end<\/td><td>Capitalise<\/td><td>Capitalise<\/td><td>Core development activity<\/td><\/tr><tr><td>Testing and QA during the build<\/td><td>Capitalise<\/td><td>Capitalise<\/td><td>Part of getting the asset ready for intended use<\/td><\/tr><tr><td>Visual design of application screens<\/td><td>Capitalise<\/td><td>Capitalise<\/td><td>Development of the asset&#8217;s functionality<\/td><\/tr><tr><td>Design of purely promotional marketing pages<\/td><td>Assess normally<\/td><td><strong>Expense<\/strong><\/td><td>SIC-32 expenses solely promotional website expenditure outright<\/td><\/tr><tr><td>Writing website content and copy<\/td><td>Generally expense<\/td><td>Expense if promotional<\/td><td>Advertising-nature costs; content is rarely an asset<\/td><\/tr><tr><td>Content migration from the old site<\/td><td>Expense<\/td><td>Expense<\/td><td>Data conversion is expensed as incurred<\/td><\/tr><tr><td>Data conversion and cleansing<\/td><td>Expense<\/td><td>Expense<\/td><td>Explicitly excluded from capitalisation<\/td><\/tr><tr><td>SEO work, keyword research, on-page optimisation<\/td><td>Expense<\/td><td>Expense<\/td><td>Marketing activity, not asset creation<\/td><\/tr><tr><td>Domain registration and renewal<\/td><td>Expense (renewals)<\/td><td>Expense (renewals)<\/td><td>Recurring operating cost; a purchased domain right may be a separate asset<\/td><\/tr><tr><td>Hosting fees<\/td><td>Expense<\/td><td>Expense<\/td><td>Service consumed as you go<\/td><\/tr><tr><td>Training your team to use it<\/td><td>Expense<\/td><td>Expense<\/td><td>Explicitly excluded under both frameworks<\/td><\/tr><tr><td>Bug fixes and maintenance after launch<\/td><td>Expense<\/td><td>Expense<\/td><td>Maintains existing service potential rather than adding to it<\/td><\/tr><tr><td>Post-launch work that adds new functionality<\/td><td>Capitalise<\/td><td>Capitalise<\/td><td>Treated as a new project against the same criteria<\/td><\/tr><tr><td>Design iterations that change how it looks but not what it does<\/td><td>Generally expense<\/td><td>Generally expense<\/td><td>No additional functionality means no additional economic benefit<\/td><\/tr><tr><td>General and administrative overhead allocated to the project<\/td><td>Expense<\/td><td>Expense<\/td><td>Excluded by both frameworks<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The one that causes the most arguments is the last-but-two: <strong>enhancement versus maintenance<\/strong>. The test is whether the work adds functionality that wasn&#8217;t there before. Making an existing feature faster is usually maintenance. Adding a feature that didn&#8217;t exist is usually an enhancement, assessed as its own mini-project. Redesigning a page so it looks different but does the same thing is maintenance, and finance teams almost always want it to be an enhancement.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Worked example 1: a $60,000 website and portal rebuild<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A US company reporting under US GAAP rebuilds its website. The new site has marketing pages and a logged-in customer portal where clients can view order status. The project is authorised and funded by the CTO in March; completion is judged probable; there&#8217;s nothing technically novel about it.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Line item<\/th><th>Amount<\/th><th>Treatment<\/th><\/tr><\/thead><tbody><tr><td>Discovery, requirements, technical scoping<\/td><td>$6,000<\/td><td>Expense<\/td><\/tr><tr><td>Design and build of marketing pages<\/td><td>$9,000<\/td><td>Capitalise<\/td><\/tr><tr><td>Customer portal \u2014 back end, front end, integrations<\/td><td>$26,000<\/td><td>Capitalise<\/td><\/tr><tr><td>QA and testing<\/td><td>$4,000<\/td><td>Capitalise<\/td><\/tr><tr><td>Copywriting and content migration<\/td><td>$7,000<\/td><td>Expense<\/td><\/tr><tr><td>SEO setup and redirect mapping<\/td><td>$3,000<\/td><td>Expense<\/td><\/tr><tr><td>Team training<\/td><td>$2,000<\/td><td>Expense<\/td><\/tr><tr><td>First year hosting<\/td><td>$3,000<\/td><td>Expense<\/td><\/tr><tr><td><strong>Total<\/strong><\/td><td><strong>$60,000<\/strong><\/td><td><strong>$39,000 capitalised \/ $21,000 expensed<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">In plain terms: $39,000 goes to an intangible asset on the balance sheet and is amortised on a straight-line basis over its useful life. If the company assesses that at three years, that&#8217;s $13,000 a year hitting the income statement, starting when the site goes live and is ready for its intended use. The other $21,000 hits the income statement immediately.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Now run the same project under IFRS.<\/strong> The marketing pages exist solely to promote the company&#8217;s products. SIC-32 expenses them outright, so that $9,000 moves from capitalised to expensed. The customer portal has functionality beyond promotion, so it survives the IAS 38.57 test and stays capitalised. <strong>Result: $30,000 capitalised, $30,000 expensed.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Same project. Same invoices. A $9,000 difference in this year&#8217;s operating profit, purely because of which framework you report under. That is not a rounding error, and it&#8217;s why &#8220;can we capitalise the website&#8221; has no single answer.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Worked example 2: a $45,000 SaaS implementation<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A company signs a three-year subscription for a hosted ERP platform at $90,000 a year, and pays an implementation partner $45,000.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><thead><tr><th>Line item<\/th><th>Amount<\/th><th>US GAAP<\/th><th>IFRS<\/th><\/tr><\/thead><tbody><tr><td>Vendor evaluation and selection<\/td><td>$5,000<\/td><td>Expense<\/td><td>Expense<\/td><\/tr><tr><td>Configuration of the hosted platform<\/td><td>$15,000<\/td><td>Capitalise<\/td><td>Expense<\/td><\/tr><tr><td>Custom integration code the company owns and hosts<\/td><td>$8,000<\/td><td>Capitalise<\/td><td>Possible separate intangible \u2014 assess<\/td><\/tr><tr><td>Data migration and cleansing<\/td><td>$12,000<\/td><td>Expense<\/td><td>Expense<\/td><\/tr><tr><td>Training and change management<\/td><td>$5,000<\/td><td>Expense<\/td><td>Expense<\/td><\/tr><tr><td><strong>Total<\/strong><\/td><td><strong>$45,000<\/strong><\/td><td><strong>$23,000 capitalised<\/strong><\/td><td><strong>$8,000 at most<\/strong><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Under US GAAP:<\/strong> $23,000 sits on the balance sheet alongside the hosting prepayment, amortised over the three-year term at roughly $7,667 a year \u2014 and that amortisation appears on the same income statement line as the $90,000 subscription, not in depreciation and amortisation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Under IFRS:<\/strong> the $15,000 configuration is expensed because the company doesn&#8217;t control the hosted software. Only the $8,000 of integration code has a route to the balance sheet, and only if the company genuinely controls that code as a separate resource \u2014 meaning it could run it independently of the vendor&#8217;s platform. If it can&#8217;t, that&#8217;s expensed too, and the entire $45,000 hits this year&#8217;s profit and loss.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This pattern repeats on every <a href=\"\/services\/erp-development\/\" data-type=\"link\" data-id=\"\/services\/erp-development\/\">ERP implementation<\/a> and <a href=\"\/services\/crm-development\/\" data-type=\"link\" data-id=\"\/services\/crm-development\/\">CRM rollout<\/a> we work on. The framework you report under changes the answer by tens of thousands.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Tax: where each market diverges from the accounts<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">United States<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Under <strong>IRC \u00a7174A<\/strong>, created by the One Big Beautiful Bill Act (signed 4 July 2025), domestic research and experimental expenditure \u2014 including software development \u2014 can be deducted in the year incurred, for tax years beginning after <strong>31 December 2024<\/strong>. Foreign research and experimental expenditure remains subject to 15-year amortisation under \u00a7174.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Procedural guidance came in <strong>Rev. Proc. 2025-28<\/strong> (released 29 August 2025). A retroactive election was available to eligible small businesses \u2014 those meeting the \u00a7448(c) gross receipts test, with average annual gross receipts of $31 million or less, applied with controlled-group aggregation \u2014 allowing amended returns for 2022 through 2024. <strong>That window closed on 6 July 2026.<\/strong> If you were eligible and didn&#8217;t file, it has gone.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">One older rule worth naming because it appears in a lot of stale content, including the previous version of this post: <strong>Rev. Proc. 2000-50 Section 5<\/strong>, which permitted a 36-month amortisation of software development costs, was rendered obsolete for costs incurred in tax years after 2021. If a page tells you to spread website development over three years, it hasn&#8217;t been updated since 2021.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">United Kingdom<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">HMRC&#8217;s guidance on website costs sits at <strong>BIM35815<\/strong>, with in-house software at <strong>BIM35822<\/strong> and <strong>BIM35850<\/strong>. The underlying test is the classic capital-versus-revenue one: expenditure creating an asset of enduring benefit is capital; ongoing maintenance, updates and regular content refreshes are revenue and deductible as incurred. (<a href=\"https:\/\/www.gov.uk\/hmrc-internal-manuals\/business-income-manual\/bim35815\">HMRC Business Income Manual<\/a>.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For most companies the distinction bites less than you&#8217;d expect, because the <strong>intangible fixed assets regime<\/strong> in Part 8 of CTA 2009 generally makes the tax treatment follow the accounts for software created or acquired on or after 1 April 2002. Get the accounts right and the tax largely follows. (<a href=\"https:\/\/www.gov.uk\/hmrc-internal-manuals\/corporate-intangibles-research-and-development-manual\">HMRC CIRD manual<\/a>.)<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">On R&amp;D relief, the merged RDEC scheme gives a 20% above-the-line credit, worth roughly 15\u201316.2% net of corporation tax depending on your rate, for accounting periods beginning on or after 1 April 2024.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Australia<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The ATO addresses this directly in <strong>TR 2016\/3<\/strong>, <em>Income tax: deductibility of expenditure on a commercial website<\/em>. It sorts website expenditure into three buckets: immediately deductible (routine operating costs, maintenance, domain renewals), deductible over time as <strong>in-house software<\/strong> (a five-year effective life for assets first used on or after 1 July 2015), or not deductible but added to a <strong>CGT asset cost base<\/strong> \u2014 which is where domain name rights typically land. The ruling contains 26 worked examples and is the most practically useful government document on this topic in any jurisdiction. (<a href=\"https:\/\/www.ato.gov.au\/\">ATO<\/a>.)<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">India<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Ind AS 38<\/strong> is substantively converged with IAS 38, and its appendix carries the SIC-32 website guidance. ICAI has published Educational Material on Ind AS 38. If you report under Ind AS, the IFRS section of this post applies to you with no meaningful modification. Companies still on the older AS 26 should check with their auditor, as the recognition wording differs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Citation-ready facts<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If you&#8217;re extracting the load-bearing statements from this post, these are them:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>ASU 2025-06, issued 18 September 2025, removes the three project-stage model from ASC 350-40 and supersedes ASC 350-50 for website development costs.<\/li>\n\n\n\n<li>ASU 2025-06 is effective for annual periods beginning after 15 December 2027 for all entities, with early adoption permitted.<\/li>\n\n\n\n<li>Under amended ASC 350-40-25-12, capitalisation begins when management commits funding and completion of the project is probable.<\/li>\n\n\n\n<li>ASC 350-40-25-12A prevents capitalisation where significant development uncertainty exists, including novel or unproven functionality not yet resolved through coding and testing.<\/li>\n\n\n\n<li>ASC 985-20 requires technological feasibility before capitalising software developed to be sold, leased or marketed, and was not amended by ASU 2025-06.<\/li>\n\n\n\n<li>IAS 38.54 prohibits recognising any intangible asset arising from research; research costs are always expensed under IFRS.<\/li>\n\n\n\n<li>SIC-32 requires all expenditure on a website developed solely or primarily to promote the entity&#8217;s own products to be expensed as incurred.<\/li>\n\n\n\n<li>The IFRS Interpretations Committee&#8217;s March 2021 agenda decision concluded that SaaS configuration and customisation costs are generally expensed because the customer does not control the software.<\/li>\n\n\n\n<li>Under ASC 350-40-45-1, amortisation of capitalised cloud implementation costs is presented on the same income statement line as the hosting fee, not within depreciation and amortisation.<\/li>\n\n\n\n<li>IRC \u00a7174A, enacted 4 July 2025, permits immediate deduction of domestic research and experimental expenditure for US tax years beginning after 31 December 2024, while foreign expenditure remains on 15-year amortisation.<\/li>\n\n\n\n<li>The UK merged RDEC scheme provides a 20% above-the-line expenditure credit for accounting periods beginning on or after 1 April 2024.<\/li>\n\n\n\n<li>ATO ruling TR 2016\/3 classifies commercial website expenditure as immediately deductible, in-house software with a five-year effective life, or a CGT cost base addition.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">What we do on our side to make this easier<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">We&#8217;re the vendor. Some of the difficulty here is created by how development firms invoice, and it&#8217;s avoidable.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>We line-item by workstream, not by month.<\/strong> &#8220;Development services \u2014 March: $18,000&#8221; is useless to a finance team eighteen months later. Discovery, build, content, migration, training and QA appear as separate lines with separate totals, because those lines map directly to different accounting treatments.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>We record the date the build was authorised.<\/strong> Under both the old and new US GAAP models, and under IAS 38, the capitalisation clock starts at a specific, evidenced moment. A signed statement of work with a date on it is the cleanest evidence there is. Your auditor will ask for it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>We separate configuration from custom code on SaaS work.<\/strong> These have different answers under IFRS and sometimes under US GAAP. Splitting them at invoice time costs us nothing and saves a reconstruction exercise later.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>We flag when requirements are still moving.<\/strong> Under ASC 350-40-25-12A, unresolved performance requirements block capitalisation. If a project is still in genuine flux, we say so in the status report, and that report is dated evidence.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>We note whether work adds functionality or maintains it.<\/strong> Post-launch, this is the single most contested distinction. A one-line note on the ticket at the time is worth more than an argument at year-end.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you want this level of documentation on a project, ask for it at kickoff. It&#8217;s a formatting decision, not extra work. You can <a href=\"https:\/\/crm.qalbit.com\/book\/discuss-project\">book a call with us<\/a> if you&#8217;d like to talk through how it would apply to a specific build.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Corrections to the previous version of this post<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">This page was published on 12 October 2020 and has been fully rewritten. Three things in the original are now wrong and are corrected above:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>The three-stage model was presented as the definitive US GAAP answer.<\/strong> ASU 2025-06 removes it. The post now covers both the current model and the incoming one, with effective dates, because both are live depending on adoption.<\/li>\n\n\n\n<li><strong>The original recommended spreading outsourced website development costs over three years for US tax.<\/strong> That reflected Rev. Proc. 2000-50 Section 5, obsolete for tax years after 2021 and superseded again by \u00a7174A.<\/li>\n\n\n\n<li><strong>The original addressed only US treatment and blended book with tax.<\/strong> IFRS, UK, Australian and Indian treatment are now covered separately, and book and tax are kept apart throughout.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Cloud and SaaS implementation costs were not covered at all in the original and are now a full section.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Changelog \u2014 4 September 2026: complete rewrite. Added ASU 2025-06, IRC \u00a7174A, IFRIC March 2021 SaaS agenda decision, SIC-32 promotional-website rule, UK\/Australia\/India treatment, two worked examples, and a line-item decision table. Removed obsolete three-year US tax amortisation guidance and the ASC 350-50 framing.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Website development costs encompass all expenses associated with creating or updating a website, ranging from basic setups to complex custom designs. These costs can significantly impact an organization\u2019s reputation and profitability, as a well-crafted website serves not only to promote products and services but also to store important internal information. The stages of website development include planning, application and infrastructure development, graphical design, and content creation. Understanding and managing these costs\u2014whether they relate to software, functionality, or maintenance\u2014are crucial for businesses aiming to leverage their online presence effectively. Proper planning and strategy are essential for capitalizing on these expenses, ultimately determining the success of the website in enhancing audience engagement and conversion rates.<\/p>\n","protected":false},"author":1,"featured_media":3483,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[410],"tags":[503,507,504,506,505],"class_list":["post-589","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-and-industry","tag-accounting","tag-ifrs","tag-software-development-costs","tag-us-gaap","tag-website-development"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Capitalize Software Development Costs: 2026 Rules<\/title>\n<meta name=\"description\" content=\"ASU 2025-06 scrapped the three-stage model. IRC 174A changed the tax answer. What that means for your next development invoice, explained plainly.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Capitalise or Expense: Website &amp; Software Development Costs\" \/>\n<meta property=\"og:description\" content=\"The three-stage model is gone. The US tax answer changed. A plain-English guide to which development costs you can capitalise, under US GAAP and IFRS.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/\" \/>\n<meta property=\"og:site_name\" content=\"QalbIT\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/qalbit.sol\/\" \/>\n<meta property=\"article:published_time\" content=\"2020-10-12T08:30:10+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-09-04T15:27:48+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-or-expense-software-development-costs-hero.webp\" \/>\n\t<meta property=\"og:image:width\" content=\"1672\" \/>\n\t<meta property=\"og:image:height\" content=\"941\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/webp\" \/>\n<meta name=\"author\" content=\"Abidhusain Chidi\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Capitalise or Expense: Website &amp; Software Development Costs\" \/>\n<meta name=\"twitter:description\" content=\"The three-stage model is gone. The US tax answer changed. A plain-English guide to which development costs you can capitalise, under US GAAP and IFRS.\" \/>\n<meta name=\"twitter:creator\" content=\"@qalb_it\" \/>\n<meta name=\"twitter:site\" content=\"@qalb_it\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Abidhusain Chidi\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"20 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/\"},\"author\":{\"name\":\"Abidhusain Chidi\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#\\\/schema\\\/person\\\/459440a31e21814bc9603465945ed83e\"},\"headline\":\"Capitalise or Expense: Accounting for Website and Software Development Costs\",\"datePublished\":\"2020-10-12T08:30:10+00:00\",\"dateModified\":\"2026-09-04T15:27:48+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/\"},\"wordCount\":4375,\"publisher\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#organization\"},\"image\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/uploads\\\/2020\\\/10\\\/capitalise-or-expense-software-development-costs-hero.webp\",\"keywords\":[\"Accounting\",\"IFRS\",\"Software development costs\",\"US gaap\",\"Website development\"],\"articleSection\":[\"Business and Industry\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/\",\"url\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/\",\"name\":\"Capitalize Software Development Costs: 2026 Rules\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/uploads\\\/2020\\\/10\\\/capitalise-or-expense-software-development-costs-hero.webp\",\"datePublished\":\"2020-10-12T08:30:10+00:00\",\"dateModified\":\"2026-09-04T15:27:48+00:00\",\"description\":\"ASU 2025-06 scrapped the three-stage model. IRC 174A changed the tax answer. What that means for your next development invoice, explained plainly.\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/#primaryimage\",\"url\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/uploads\\\/2020\\\/10\\\/capitalise-or-expense-software-development-costs-hero.webp\",\"contentUrl\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/uploads\\\/2020\\\/10\\\/capitalise-or-expense-software-development-costs-hero.webp\",\"width\":1672,\"height\":941,\"caption\":\"One invoice, two treatments \u2014 the split depends on what the work was, when it happened, and which framework you report under.\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/can-website-development-be-capitalized\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Capitalise or Expense: Accounting for Website and Software Development Costs\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#website\",\"url\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/\",\"name\":\"QalbIT Blog\",\"description\":\"Complex problem, Simple Solution\",\"publisher\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#organization\",\"name\":\"QalbIT Infotech Pvt Ltd\",\"alternateName\":\"QalbIT\",\"url\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/uploads\\\/2026\\\/07\\\/qalbit-logo-512.png\",\"contentUrl\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/uploads\\\/2026\\\/07\\\/qalbit-logo-512.png\",\"width\":512,\"height\":512,\"caption\":\"QalbIT Infotech Pvt Ltd\"},\"image\":{\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#\\\/schema\\\/logo\\\/image\\\/\"},\"sameAs\":[\"https:\\\/\\\/www.facebook.com\\\/qalbit.sol\\\/\",\"https:\\\/\\\/x.com\\\/qalb_it\",\"https:\\\/\\\/www.linkedin.com\\\/company\\\/qalbit\\\/\",\"https:\\\/\\\/www.instagram.com\\\/qalb_it\\\/\"]},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/#\\\/schema\\\/person\\\/459440a31e21814bc9603465945ed83e\",\"name\":\"Abidhusain Chidi\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/litespeed\\\/avatar\\\/41af0dceb95a80e1573c1834535ff9cd.jpg?ver=1788818203\",\"url\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/litespeed\\\/avatar\\\/41af0dceb95a80e1573c1834535ff9cd.jpg?ver=1788818203\",\"contentUrl\":\"https:\\\/\\\/qalbit.com\\\/blog\\\/wp-content\\\/litespeed\\\/avatar\\\/41af0dceb95a80e1573c1834535ff9cd.jpg?ver=1788818203\",\"caption\":\"Abidhusain Chidi\"},\"description\":\"Leading QalbIT Infotech Pvt Ltd, he brings over a decade of expertise in web, mobile, and cloud technologies, driving digital success for startups and businesses. His strategic approach to SaaS, PaaS, and BaaS solutions delivers innovative, scalable results tailored to client needs.\",\"sameAs\":[\"https:\\\/\\\/qalbit.com\\\/qalbit\\\/blog\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Capitalize Software Development Costs: 2026 Rules","description":"ASU 2025-06 scrapped the three-stage model. IRC 174A changed the tax answer. What that means for your next development invoice, explained plainly.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/","og_locale":"en_US","og_type":"article","og_title":"Capitalise or Expense: Website & Software Development Costs","og_description":"The three-stage model is gone. The US tax answer changed. A plain-English guide to which development costs you can capitalise, under US GAAP and IFRS.","og_url":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/","og_site_name":"QalbIT","article_publisher":"https:\/\/www.facebook.com\/qalbit.sol\/","article_published_time":"2020-10-12T08:30:10+00:00","article_modified_time":"2026-09-04T15:27:48+00:00","og_image":[{"width":1672,"height":941,"url":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-or-expense-software-development-costs-hero.webp","type":"image\/webp"}],"author":"Abidhusain Chidi","twitter_card":"summary_large_image","twitter_title":"Capitalise or Expense: Website & Software Development Costs","twitter_description":"The three-stage model is gone. The US tax answer changed. A plain-English guide to which development costs you can capitalise, under US GAAP and IFRS.","twitter_creator":"@qalb_it","twitter_site":"@qalb_it","twitter_misc":{"Written by":"Abidhusain Chidi","Est. reading time":"20 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/#article","isPartOf":{"@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/"},"author":{"name":"Abidhusain Chidi","@id":"https:\/\/qalbit.com\/blog\/#\/schema\/person\/459440a31e21814bc9603465945ed83e"},"headline":"Capitalise or Expense: Accounting for Website and Software Development Costs","datePublished":"2020-10-12T08:30:10+00:00","dateModified":"2026-09-04T15:27:48+00:00","mainEntityOfPage":{"@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/"},"wordCount":4375,"publisher":{"@id":"https:\/\/qalbit.com\/blog\/#organization"},"image":{"@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/#primaryimage"},"thumbnailUrl":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-or-expense-software-development-costs-hero.webp","keywords":["Accounting","IFRS","Software development costs","US gaap","Website development"],"articleSection":["Business and Industry"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/","url":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/","name":"Capitalize Software Development Costs: 2026 Rules","isPartOf":{"@id":"https:\/\/qalbit.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/#primaryimage"},"image":{"@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/#primaryimage"},"thumbnailUrl":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-or-expense-software-development-costs-hero.webp","datePublished":"2020-10-12T08:30:10+00:00","dateModified":"2026-09-04T15:27:48+00:00","description":"ASU 2025-06 scrapped the three-stage model. IRC 174A changed the tax answer. What that means for your next development invoice, explained plainly.","breadcrumb":{"@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/#primaryimage","url":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-or-expense-software-development-costs-hero.webp","contentUrl":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-or-expense-software-development-costs-hero.webp","width":1672,"height":941,"caption":"One invoice, two treatments \u2014 the split depends on what the work was, when it happened, and which framework you report under."},{"@type":"BreadcrumbList","@id":"https:\/\/qalbit.com\/blog\/can-website-development-be-capitalized\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/qalbit.com\/blog\/"},{"@type":"ListItem","position":2,"name":"Capitalise or Expense: Accounting for Website and Software Development Costs"}]},{"@type":"WebSite","@id":"https:\/\/qalbit.com\/blog\/#website","url":"https:\/\/qalbit.com\/blog\/","name":"QalbIT Blog","description":"Complex problem, Simple Solution","publisher":{"@id":"https:\/\/qalbit.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/qalbit.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/qalbit.com\/blog\/#organization","name":"QalbIT Infotech Pvt Ltd","alternateName":"QalbIT","url":"https:\/\/qalbit.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/qalbit.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2026\/07\/qalbit-logo-512.png","contentUrl":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2026\/07\/qalbit-logo-512.png","width":512,"height":512,"caption":"QalbIT Infotech Pvt Ltd"},"image":{"@id":"https:\/\/qalbit.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/qalbit.sol\/","https:\/\/x.com\/qalb_it","https:\/\/www.linkedin.com\/company\/qalbit\/","https:\/\/www.instagram.com\/qalb_it\/"]},{"@type":"Person","@id":"https:\/\/qalbit.com\/blog\/#\/schema\/person\/459440a31e21814bc9603465945ed83e","name":"Abidhusain Chidi","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/qalbit.com\/blog\/wp-content\/litespeed\/avatar\/41af0dceb95a80e1573c1834535ff9cd.jpg?ver=1788818203","url":"https:\/\/qalbit.com\/blog\/wp-content\/litespeed\/avatar\/41af0dceb95a80e1573c1834535ff9cd.jpg?ver=1788818203","contentUrl":"https:\/\/qalbit.com\/blog\/wp-content\/litespeed\/avatar\/41af0dceb95a80e1573c1834535ff9cd.jpg?ver=1788818203","caption":"Abidhusain Chidi"},"description":"Leading QalbIT Infotech Pvt Ltd, he brings over a decade of expertise in web, mobile, and cloud technologies, driving digital success for startups and businesses. His strategic approach to SaaS, PaaS, and BaaS solutions delivers innovative, scalable results tailored to client needs.","sameAs":["https:\/\/qalbit.com\/qalbit\/blog"]}]}},"featured_image_url":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2020\/10\/capitalise-or-expense-software-development-costs-hero.webp","author_name":"Abidhusain Chidi","author_image_url":"https:\/\/qalbit.com\/blog\/wp-content\/uploads\/2024\/09\/abidhusain-ceo-150x150.png","author_position":"","_links":{"self":[{"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/posts\/589","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/comments?post=589"}],"version-history":[{"count":2,"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/posts\/589\/revisions"}],"predecessor-version":[{"id":3488,"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/posts\/589\/revisions\/3488"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/media\/3483"}],"wp:attachment":[{"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/media?parent=589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/categories?post=589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qalbit.com\/blog\/wp-json\/wp\/v2\/tags?post=589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}