IMA FRC comment letter response to proposed ASU on intangibles—goodwill and other—internal-use software
January 27, 2025
IMA’s Financial Reporting Committee (FRC or Committee) issued a comment letter to share its views on the Financial Accounting Standards Board’s (FASB or Board) Proposed Accounting Standards Update (ASU), Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (Proposed Update).
The Committee expressed its support of the Board’s intent to improve the operability of the internal‐use software guidance through targeted improvements and an overall modernization of the language and terminology used throughout Subtopic 350‐40 given the evolution of software development methods.
The Committee continued that while it believes there is merit to scoping out SAAS development entirely from Subtopic 350‐40 and into Subtopic 985‐20 given the economic similarities between SAAS and software that is sold, leased, or otherwise marketed externally, it understands the Board has already considered and dismissed that wholesale change in favor of targeted improvements to Subtopic 350‐40. However, to strengthen the connection between the two related Subtopics, the Committee believes the Proposed Update should include a more explicit connection to the concept of technological feasibility in the proposed amendments related to significant development uncertainty.
In an Appendix I, the Committee offered some observations and concerns about the application of significant development uncertainty judgments, the proposed requirements for separate presentation of cash paid for software costs in the statement of cash flows, and the usefulness of the illustrations in the Proposed Update. An Appendix II provided proposed illustrations to include in the implementation guidance.