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> If (as you imply) SW developers are critical to this year’s revenue (vs. building for future years revenue), then why don’t they go in COGS? Ok, so we're on

> If (as you imply) SW developers are critical to this year’s revenue (vs. building for future years revenue), then why don’t they go in COGS? Ok, so we're on the same page! Salaries should be expensed! Unfortunately, the page that you and I are on is NOT the page that United States Government is on. Which... is the point. You said in a parent comment > So this most affects companies that have a relatively large R&D org This has nothing to do with R&D orgs. We're talking about software developer salaries, not R&D. According to the new change, all software developer expenses must be amortized over 5 years, which you and I both agree seems like a silly idea. I think you're arguing for a common sense approach of not categorizing them as R&D, which I would highly encourage you to run past your CPA before you accidentally commit tax evasion.

RC_ITR 3y ago
Wait wait wait. You think that all sw devs now are in R&D and not COGS? Golly! Plenty of SW devs who work on this years revenue are COGS throughout the industry. The game is putting sw devs who work on future years’ revenue in opex. Since you’re so attuned to cash accounting let’s change up your example. I prepay $1mn in advertising cost for ads that will run over 5 years. I spent that cash now, but should I be able to expense that whole $1mn this year? EDIT: Don't believe me, here's Airbnb: Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology.
- aarondf 3y ago
  > You think that all sw devs now are in R&D and not COGS? Huh? I don't think that, that's literally what this law is doing. Moving all software developer expenses out of COGS and into R&D that must be amortized. You're arguing what should be, and I agree with you. It should be COGS. If you go read the law (or... even the article) you'll realize that what should be the case, is not the case. It has nothing to do with what I think! > Since you’re so attuned to cash accounting let’s change up your example. > I prepay $1mn in advertising cost for ads that will run over 5 years. I spent that cash now, but should I be able to expense that whole $1mn this year? Umm if you're doing cash accounting, yeah. Haha. That's not the point you were trying to make though. If you're doing accrual accounting, no. That's a prepaid expense (asset) which changes to an expense over time as you incur it. If you want to learn more about accounting, I have a website where I teach introduction to financial accounting topics at https://acct229.com https://acct229.com. You might enjoy it!
  - RC_ITR 3y ago
    I appreciate the offer, but this level of misunderstanding makes me believe I wouldn't get a lot of value out of you as a teacher. My earnest advice to you is sometimes slow down and really think about what other people are saying.
    - appking 3y ago
      Sorry but you are the one that needs to slow down and understand what people are trying to say. According to the tax law, it is now a stipulation that all Software Engineers (SWEs) are classified as R&D professionals. This is not a matter of personal interpretation or opinion.
    - aarondf 3y ago
      Happy to schedule a call to better understand what you're saying. I'm pretty easy to find online.
- aarondf 3y ago
  Replying to your edit. That note is financial accounting, we're talking about tax accounting. Entirely different worlds with entirely different rules.

RC_ITR 3y ago

Wait wait wait. You think that all sw devs now are in R&D and not COGS? Golly! Plenty of SW devs who work on this years revenue are COGS throughout the industry. The game is putting sw devs who work on future years’ revenue in opex. Since you’re so attuned to cash accounting let’s change up your example. I prepay $1mn in advertising cost for ads that will run over 5 years. I spent that cash now, but should I be able to expense that whole $1mn this year? EDIT: Don't believe me, here's Airbnb: Cost of revenue includes payment processing costs, including merchant fees and chargebacks, costs associated with third-party data centers used to host our platform, and amortization of internally developed software and acquired technology.

aarondf 3y ago
> You think that all sw devs now are in R&D and not COGS? Huh? I don't think that, that's literally what this law is doing. Moving all software developer expenses out of COGS and into R&D that must be amortized. You're arguing what should be, and I agree with you. It should be COGS. If you go read the law (or... even the article) you'll realize that what should be the case, is not the case. It has nothing to do with what I think! > Since you’re so attuned to cash accounting let’s change up your example. > I prepay $1mn in advertising cost for ads that will run over 5 years. I spent that cash now, but should I be able to expense that whole $1mn this year? Umm if you're doing cash accounting, yeah. Haha. That's not the point you were trying to make though. If you're doing accrual accounting, no. That's a prepaid expense (asset) which changes to an expense over time as you incur it. If you want to learn more about accounting, I have a website where I teach introduction to financial accounting topics at https://acct229.com https://acct229.com. You might enjoy it!
- RC_ITR 3y ago
  I appreciate the offer, but this level of misunderstanding makes me believe I wouldn't get a lot of value out of you as a teacher. My earnest advice to you is sometimes slow down and really think about what other people are saying.
  - appking 3y ago
    Sorry but you are the one that needs to slow down and understand what people are trying to say. According to the tax law, it is now a stipulation that all Software Engineers (SWEs) are classified as R&D professionals. This is not a matter of personal interpretation or opinion.
  - aarondf 3y ago
    Happy to schedule a call to better understand what you're saying. I'm pretty easy to find online.
aarondf 3y ago
Replying to your edit. That note is financial accounting, we're talking about tax accounting. Entirely different worlds with entirely different rules.