USA Billing Software Licenses to be capitalized?

[IUPAccountant]

Our company is purchasing additional licenses for our billing software. Should this purchase be capitalized and what FASB should I reference in regards to this treatment?

 

[Counterofbeans]

What are you purchasing the licenses for? To simply use the billing software?

 

[IUPAccountant]

What are you purchasing the licenses for? To simply use the billing software?

To expand our billing department. We have added a number of new locations each of the last few years and are planning to add new locations each year. We initially purchased the software a few years ago to enhance our collections and billing and need to add users.

 

[Counterofbeans]

What are the terms of the licenses?

 

[IUPAccountant]

It is a purchase for a set price of a few thousand, and the licenses are good for the remainder of the useful life of the software which we estimate to be 3 years.

 

[Counterofbeans]

Just set up the licenses as prepaid expenses for those amounts that will be used/amortized within 12 months and the remainder (24 months?) as a long-term asset and call it a day.

You could probably take the position that you can capitalize it as part of the software, but I think that's a weaker argument.