Are costs incurred prior to the decision to purchase or develop software to be capitalized?
Pre-decision costs, such as conceptual formulation, preliminary designs, and evaluation of alternatives are not to be capitalized. • Should data conversion costs be capitalized? No. Data conversion costs, including cleansing of existing data, reconciling data, or cost of additional software to convert data, should not be included in capitalizing the software. • What is the cutoff for capitalizing software? Costs incurred up to the point of final acceptance testing should be capitalized. Procedurally, this is when the FFS project should be closed and the project completion form (Attachment 2) submitted. Costs incurred after final acceptance testing should not be capitalized. I. Does this IM apply to all purchased software or software development projects? No. Research and development projects are exempt from this capitalization criterion. If the software is being purchased or developed as part of a research and development project, then the costs should be expensed as incurred. If you a
