Non current asset or License fees

[Crystal Tan]

Assuming these scenarios:

1) Company paid an amount of $6000 for usage of a software, the product CD Rom was given. On top of that, the company has to pay annual licensing and maintenance fees.

2) The company paid a sign up fee of $4,000 to use the software, the product CD Rom was also given. The company has to pay annual maintenance fees.

Both can use as long as you want. How should i categorized the above scenarios? Non current assets or expenditure?

Thanks!

 

[Steve-LevelUp]

The rule here would be to capitalize the up front costs and expense the annual maintenance fees over the year (or however long the maintenance fees apply) This is a common structure for high end software where there is a large setup fee as well as an annual maintenance/upgrade fee.