Costs associated with the acquisition of enterprise wide systems will be capitalized at the amount paid for the software license. An enterprise wide system is defined as an ERP system that is implemented campus or university wide and represents a major outlay for the University. Typically, enterprise wide administrative systems include financial systems comprised of accounting, purchasing, accounts payable, and fixed assets, human resource systems, budget systems, grants management systems, and student information systems.
The total capitalized cost of an ERP system will be the combined amounts paid to the vendors for the system software licenses and related consultant’s implementation fees paid to the vendors or external consultants, but not maintenance expenses associated with the software. It does not include hardware capitalized as computer equipment. University payroll expenses devoted directly to the project and incurred to implement the system will be capitalized and interest costs incurred during development. Upgrades and enhancements should not be capitalized unless they significantly increase the system functionality or extend system life. Costs prior to the preliminary profit stage and costs incurred once testing is complete should be expenses as incurred. Accordingly, training and data conversion expenses will not be capitalized. Expenses associated with studying the need for a system, identifying the system requirements, and evaluating and selecting the software system to be purchased will not be capitalized.
Computer software will typically be capitalized for three to five years and will be amortized over an estimated system life.