Write a bussiness letter that summarizes the general rules for capitializing software development costs using US GAAP and IFRS
Background During January 2015, Spacecraft Software, Inc. (SSI), a well-established and well-funded software company, began researching and developing a new and innovative software program for aircraft On June 30, 2016, SSI completed all planning, designing, coding and testing activities that are necessary to establish that a product can be produced to meet its design specifications, including functions, features and technical performance requirements. Also at that date, SSI had determined that all high-risk uncertainty issues had been resolved. design to sell to its existing customers through its sales force By August 31, 2016, SSI had developed a business plan, including identification of a ready market for the product, and a commitment of resources to ready the product for market. On December 31, 2016, the software is ready for market and a marketing launch event is held. A summary of costs follows: Amount Tracked costs Internal R&D costs January 2015 through June 2016 Internal R&D costs -July through August 2016 $100,000 $ 80,000 $250,000 I R&&D costs-September through December 2016 Preproduction costs (not incurred in the design, construction and testing of pre-production or pre-use prototype Marketing launch $ 40,0o0 $ 25,000 SSI is led by Dr. Pat Hilliard, a rather unusual aerospace engineer with a serious interest in computer science. Dr. Hilliard is brilliant but is in no way an accountant. As an engineer and scientist, he has a strong proclivity toward supporting all conclusions with citations from whatever guidance is available Required Assume you work for a regional CPA firm, Bowers & Bowers LLP, and that SSI is one of your clients. Prepare a letter to Dr. Hilliard that summarizes the general rules for capitalizing software development costs using US GAAP and IFRS. Include application of the rules to the costs amountsamounts capitalized capitalized Description Cost Internal RD costs- January 2015 through June 2016 100,00O Internal R&D costs July through August 2016 Preproduction costs Marketing launch Internal R&D costs September through December 2016 Total 80,000 40,000 25,000 250,000 $495,000 Address Dr. Pat Hilliard Spacecraft Software, Inc 7818 Monroe Avenue