Comment by patmcc

Nifty3929 explains this well, let me just add that good accounting rules try to minimize how much you can tweak by "build" vs "buy". Like building a $1b factory or buying one, if you intend to keep and use it to make cars, should be treated broadly the same way.

If you bought a 10-year license to use Unreal Engine, you'd amortize that out. If you instead built it (to use it!), the same rules should (generally) apply to the expenses you incur. If you build it to sell it...well, that gets complicated, especially as it's tough to estimate the useful life of software, and it's tough to say whether certain costs are improvements or maintenance (which are treated differently), etc.

Doing a sudden switch from salary costs being 100% expensed to 100% amortized (over 5 years for domestic, 15 years for foreign) is really bad, it's legitimately harmful for a ton of small businesses in this space. But honestly having it as 100% expensed is pretty silly. Hopefully this gets fixed with a middle ground and a gradual switchover.