Should Subscription Be Capitalized?

With software as a service, there is typically an annual subscription fee for the software and not a license. However, if the organization has the option of taking ownership of the software, and they can run the software without resources from the vendor, then the organization can still capitalize the cost.

Is software Subscription an asset or expense?

As such, many cloud software providers have also taken steps to simplify the process by moving from software service subscription fees to offering contracts based on software licensing fees. An arrangement that includes a software license is considered “internal use software” and accounted for as an intangible asset.

Is software subscription a fixed asset?

The answer to “Is software a fixed asset?" then, is often yes. The software is tangible, and it's used over an extended period of time (longer than one accounting cycle); its useful life typically includes several reporting periods, and the software isn't purchased with the intent of resale.