My company is currently looking at several SaaS
Can software licenses be capitalized?
Answers
It depends on your SaaS agreement. If your company has a right to take possession of the software at anytime during the hosting period and your company can also run the hardware on your own hardware or on an unrelated third party's hardware, then it may able to be capitalized. If the agreement only allows you to use an interface to use the hosted software, then its likely an operating expense.
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Usually, SaaS "licenses" are paid for on a short-term basis (month-to-month or quarter-to-quarter) - that's one of the attractive features of SaaS. However, if you are purchasing for, say, a year or more in advance, then yes, you would "capitalize" that purchase, but as a prepaid expense, not as software.
However, it may be that the arrangement you describe is one where you purchase a perpetual license, and then the vendor hosts the software for you. In that case then, yes, the licenses can be capitalized as software, to be written down over your standard period for software licenses (I've seen ranges of 3-5 years for software, depending on the nature of the software).
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Accounting