> If (as you imply) SW developers are critical to this year’s revenue (vs. building for future years revenue), then why don’t they go in COGS?
Ok, so we're on the same page! Salaries should be expensed!
Unfortunately, the page that you and I are on is NOT the page that United States Government is on. Which... is the point.
You said in a parent comment
> So this most affects companies that have a relatively large R&D org
This has nothing to do with R&D orgs. We're talking about software developer salaries, not R&D. According to the new change, all software developer expenses must be amortized over 5 years, which you and I both agree seems like a silly idea.
I think you're arguing for a common sense approach of not categorizing them as R&D, which I would highly encourage you to run past your CPA before you accidentally commit tax evasion.
You think that all sw devs now are in R&D and not COGS?
Golly! Plenty of SW devs who work on this years revenue are COGS throughout the industry. The game is putting sw devs who work on future years’ revenue in opex.
Since you’re so attuned to cash accounting let’s change up your example.
I prepay $1mn in advertising cost for ads that will run over 5 years. I spent that cash now, but should I be able to expense that whole $1mn this year?
EDIT: Don't believe me, here's Airbnb:
Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology.
Weird to not include that in the example then.
Maybe this will help you.
If (as you imply) SW developers are critical to this year’s revenue (vs. building for future years revenue), then why don’t they go in COGS?
Seems like an easy way to solve the problem…
> If (as you imply) SW developers are critical to this year’s revenue (vs. building for future years revenue), then why don’t they go in COGS?
Ok, so we're on the same page! Salaries should be expensed!
Unfortunately, the page that you and I are on is NOT the page that United States Government is on. Which... is the point.
You said in a parent comment
> So this most affects companies that have a relatively large R&D org
This has nothing to do with R&D orgs. We're talking about software developer salaries, not R&D. According to the new change, all software developer expenses must be amortized over 5 years, which you and I both agree seems like a silly idea.
I think you're arguing for a common sense approach of not categorizing them as R&D, which I would highly encourage you to run past your CPA before you accidentally commit tax evasion.
Wait wait wait.
You think that all sw devs now are in R&D and not COGS?
Golly! Plenty of SW devs who work on this years revenue are COGS throughout the industry. The game is putting sw devs who work on future years’ revenue in opex.
Since you’re so attuned to cash accounting let’s change up your example.
I prepay $1mn in advertising cost for ads that will run over 5 years. I spent that cash now, but should I be able to expense that whole $1mn this year?
EDIT: Don't believe me, here's Airbnb:
Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology.
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