This case contains the following materials:

A$.$

SPSS Inc. $(2008)$

$[$Balance Sheet, Income Statement; Statement of Cash Flows, Footnotes

$1($partial$),4,5,6$ and $12].$

SPSS Inc., a Delaware corporation $($SPSS$$ or the $$Company$),$ was incorporated in Illinois in $1975$

under the name $$SPSS$,$ Inc.$$ and was reincorporated in Delaware in $1993$ under the name $$SPSS

Inc.$$ SPSS is a global provider of predictive analytics software and solutions. Approximately $62\%$ of

the Company$$s revenues come from commercial firms, many of which use SPSS technology to improve

the profitability and effectiveness of their organizations by attracting new customers more efficiently,

increasing the value of existing customers through improved cross$-$selling and retention, and detecting

and preventing fraud. Among its government customers, SPSS offerings are primarily used to improve

interactions between public sector agencies and their constituents or detect forms of non$-$compliance.

At colleges and universities, SPSS statistical and data mining software products are often standards for

teaching data analysis techniques and academic research.

Questions to be answered

:

$1.$

$2.$

$3.$

$4.$

$5.$

How does SPSS account for "Software Development Costs?"

Reconcile the change in SPSS$\text{'}$s balance sheet account, "SOFTWARE DEVELOPMENT

COSTS, net of accumulated amortization," between the $2007$ and $2008$ fiscal year ends.

What amount was spent on software development and NOT capitalized during the fiscal

year?

What would SPSS$\text{'}$s net income have been in fiscal $2008$ if it expensed all "Software

Development Costs" as incurred? Make your adjustments as if the firm has always

expensed its software development costs as incurred $($rather than assuming the firm is

changing its accounting for these costs during the year$).$

Read Note $12$ in SPSS$\text{'}$s $10-$K regarding income taxes. What is the effect of SPSS$\text{'}$s

accounting policy for "Software Development Costs" on its deferred income taxes for the

$2008$ fiscal year?