Software as a corporate asset

Software engineers frequently claim that companies undervalue their software and that they should regard it as a capital asset to be placed on the balance sheet. To a considerable extent, existing accounting regulations permit this but the regulations are only permissive, they do not require it to be treated in this way and, in practice, it rarely is. The author discusses the circumstances in which such treatment is appropriate, both for end user software and for software intended to be traded. The discussion is oriented towards UK accounting practice but some aspects of US practice are briefly described. The author concludes by making some recommendations for the treatment of software on the balance sheet, all of which are consistent with the present regulatory regime; the adoption of these recommendations would lead to more frequent capitalisation of software