Comment by silverlight
3 years ago
So you're saying that the advice you got was that if it's a launched product, you can treat software development as an operating expense and just ignore the fact that 174 says software development is an R&E expense?
I mean that sounds great to me...I just also feel like it's probably a very "liberal" interpretation indeed.
The part I'm getting hung up on is essentially, previously R&E expenses (as you note) were a lot more fungible, it depended on a number of factors including how risky the endeavor was. Things that you just do day-to-day in the service of keeping your company afloat (which for a launched SaaS for example would include fixing bugs or even developing basic features) were likely not R&E. Maybe if you embarked on a journey to develop a totally new product, it would have been.
It seems like the most basic reading of this is pretty straightforward: they've taken that decision making away and said "if it's software dev, it's R&E." Not "if it's software dev for a new feature, but hey existing bug fixes and maintenance don't count," just, "software is R&E now always."
Obviously everyone has their own risk tolerance for how they interpret things and what definition they use.
The key is that as long as your interpretation is reasonable, you won't be penalized, and as long as the numbers are fine, you probably won't even be audited. If you have a good representative, you may even be able to convince an auditor that your interpretation is correct.
And yes, I would say that software that isn't continually developed rots, so if you have a launched product, you aren't really working out your technical risks, you're keeping your revenue stream alive. That sounds like a cost of goods sold to me.
Previously, all of our accountants wanted our work to be R&D, which is why we include things like "all software development" in R&D. Now, we may not want it. There are a lot of other places you can put it.
EDIT: CRUD apps have always been on the line between R&D and not R&D, so let's just put our toes on the other side for 2022 and beyond. In comparison, biotech and hard tech endeavors are screwed because that's not even arguable.