Correct Answer:
C
According to GASB Statement No. 51 – Accounting and Financial Reporting for Intangible Assets,
costs associated with internally generated computer software can be capitalized only during the
“application development stage.” Activities in this stage that are capitalizable include:
Coding
Software configuration
Testing (for functionality)
Non-capitalizable activities include:
Preliminary project planning (e.g., selecting between alternatives)
Data conversion not necessary for the software to operate
Training employees
Therefore, testing the software for functionality is an activity that should be capitalized.
Relevant Reference:
GASB Statement No. 51
GFOA Best Practices – Capitalization of Intangible Assets
Answer : C. testing the software for functionality and ease of use
