Question

If you were responsible for implementing ABC at your firm, a big undertaking for sure, how would you treat the costs involved? There would be the purchase and installation of the software and related equipment and then training for the staff, preferably by the vendor or a consultant who knows the system. The costs could be substantial and material. Would you expense them directly to the income statement or would you capitalize them (all or some?) on the balance sheet and then amortize over time?

Is there a GAAP rule that would dictate how we handle such costs?

Answer 1

The cost involved in purchase and installation of the software and related equipment for implementing the ABC system in the concerned firm will be capitalized and therefore the same will be recognized in the Statement of Financial Position / Balance Sheet. The aforesaid capitalized cost will be amortized over its useful economic life and if no amortization is charged because the life is indefinite, the concerned asset should be subject to an annual impairment review.

However, the training cost towards training to staff  will be charged directly to the Income statement as this expense may be required to incurred repetitively.   

IAS 38 on Intangible assets will guide to treat above mentioned costs.