Should Software Maintenance Be Capitalized?

Finally, once development is complete and the software is made available for release to customers, capitalization no longer is appropriate because any remaining costs are considered ongoing maintenance and support. These costs always must be expensed as they are incurred.

Is maintenance capitalized?

Repairs and maintenance are expenses a business incurs to restore an asset to a previous operating condition or to keep an asset in its current operating condition. ... This type of expenditure, regardless of cost, should be expensed and should not be capitalized.

Can software improvements be capitalized?

For a company that utilizes an off-the-shelf software package for their general ledger, the cost of the software would be capitalized along with the costs of any future upgrades. Any significant payroll costs incurred to implement this software could also be capitalized.