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ARTICLE · 24 NOVEMBER 2025

US GAAP: New Guidance For Internal-use Software

GGI | Global Alliance
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Various stakeholders have been urging the Financial Accounting Standards Board (FASB) to address its decades-old guidance, noting its decreasing relevance due to changes in how software is developed.

United StatesAccounting and Audit
Jeffrey A. Ford (Grossman Yanak & Ford LLP)
Jeffrey A. Ford (Grossman Yanak & Ford LLP)
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Various stakeholders have been urging the Financial Accounting Standards Board (FASB) to address its decades-old guidance, noting its decreasing relevance due to changes in how software is developed.

Specifically, many entities have shifted from using a prescriptive and sequential development method (for example, waterfall) to using an incremental and iterative development method (for example, agile). Existing internal-use software accounting requirements do not specifically address software developed using an incremental and iterative method. Accounting Standards Update (ASU) 2025-06 was issued in September 2025 to address these matters.

Scope

The recent ASU applies to all entities subject to the internal-use software guidance in Accounting Standards Codification (ASC) Subtopic 350-40, and to all entities that account for website development costs in accordance with Subtopic 350-50. It does not affect software costs subject to Subtopic 985-20 related

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