USA Internal Use Software Capitalization - Contingent payment post-implementation


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Agreement with a third-party developer calls for $100k to be paid for the development work plus an additional $200k if the product operates at a stated efficiency for the following 12 months post-implementation.

Obviously cap the $100k of development - but is the $200k post-implementation outcome-based payment completely expensed or is there guidance to be able to capitalize that cost, as well, or will it all be expensed as incurred?

Not having much luck finding an example to consider.
 
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kirby

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Looking at the nature of the two payments. The $100K is indeed capitalizable because a system was developed. The $200K is more in the nature of a good performance bonus and should be expensed. The $200K does not add any additional features or services or additional life to the system.
 

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