# ASC 350-40: Internal-Use Software

ASC 350-40 is the U.S. GAAP standard for capitalizing internal-use software — software built or bought to run your own business, not to sell.

**In plain terms:** if you build software to run your own business — an internal tool, or the platform behind your SaaS — ASC 350-40 tells you which build costs become an asset and which are expensed.

> **Note**
>
> **Amended by ASU 2025-06.** The three stages below are the current rule. For fiscal years beginning after December 15, 2027 (FY2028), [ASU 2025-06](/software-capitalization/asu-2025-06) removes them — capitalization keys off a probable-to-complete threshold instead. Early adoption is permitted now.

ASC 350-40 (Intangibles — Goodwill and Other: Internal-Use Software) splits a project into three stages:

- **Preliminary project stage** — planning and evaluating options. Expensed.
- **Application development stage** — designing, coding, testing, and configuring the software. Capitalized, once the project is funded and probable to complete.
- **Post-implementation stage** — maintenance, training, support. Expensed.

Direct costs in the application-development stage — engineering labor, contractor fees, and the tooling used to build the software — can be capitalized; general overhead cannot. Implementation costs for hosted (SaaS) software a company uses for itself follow the same model.

**See also:** [internal-use software in the capitalization guide](/software-capitalization#internal-use-software).

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