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  1. #1
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    US GAAP requires the cost of website to be amortized over its useful life.

    Anyone ever experience estimating the 'useful life' of a website.. for accountancy or otherwise.??

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  3. #2
    Senior Member Webzarus's Avatar
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    US GAAP is NOT a rigid set of rules but more a set of guidelines that suggest accepted accounting policies. Since their definition of "useful life" is a carryover from pretty much every industry that they provide guidelines, their is not HARD FAST, EASY way to make that determination, and no legal implications if you make an assumption and its wrong.

    Licensing of software and or any ongoing maintenance and support cannot be amortized, so you're left with cost associated with, conception, research and actual cost to get the site to go live.

    My clients basically have a treated projects the same as hardware or any other Capitol project, minus licensing and support cost. That was last year and as we all know, these things are constantly changing, so your best bet for a legal answer is going to be from your accountant or other legal professional that is made aware of the changes prior to them being put in place.

  4. #3
    Unpaid WDF Intern TheGAME1264's Avatar
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    What WZ said. The best person to ask is a lawyer or an accountant.

    The big problem with such an amortization (by which, I'm thinking you may mean depreciation) is that the "useful life" of a website is varied. People set up microsites for a month and tear them down, and people set them up and keep them up for years without changing a thing (or very little). The nature of the costs associated with a website are also so varied that it would be impossible to allocate them as capital cost investments. For example, if you have an employee go on the site once a day to update the inventory (removing product descriptions, updating sales, etc.), you can't allocate the time that employee takes to do that as a capital cost...that's an expense.

    Then you get into weird situations like co-op ad credit. If my client spends $2000 on a website in a year, and his manufacturers give him amounts of $500, $1000, $700, and $300 to promote their stuff, then that means the site is now "worth" -$500. How do you amortize that?

    My clients generally write any expenses associated with their sites as marketing expenses, which is the most logical thing to do IMHO...they're varied, as are their effects. That's how I'd treat it. Then again, I'm not a lawyer.
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  5. #4
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    Hmm.. writing them off as expenses instead of capitalizing them is probably the simplest thing to do.

  6. #5
    Senior Member Webzarus's Avatar
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    Quote Originally Posted by AlmostApproximate, post: 245810
    Hmm.. writing them off as expenses instead of capitalizing them is probably the simplest thing to do.
    Depends on the cost and your accounting methods.

    If you're a corporate entity, there are rules defining at what levels you can expense or defines something as a Capitol cost which can then be depreciated over several years depending on your structure.

    The best answer for that will come from accounting / legal experts because it all depends on how your company has set up it accounting structure and your location as each state has different requirements as well. I believe ( and I may be mistaken ), but many of those values are determined also by your quarterly filings of gross income.

    One of my clients can expense anything under 15k, where many other clients can only expense up to but less than 6k .... ( or so I'm told ). Every situation is different depending on many factors... And only a tax and financial expert can give you the correct answer for your situation.

  7. #6
    Unpaid WDF Intern TheGAME1264's Avatar
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    What he said. That's why I also used the word "generally". I'm not sure whether or not there are site elements that are defined as capital costs. I don't think there are any myself, but again, I'm not a lawyer.

    I write everything off as expenses when it comes to my own sites, just because everything I do related to them could easily enough be justified as an expense (e.g. hosting...it's a "maintenance" cost). I have received legal advice stating that I'm doing this correctly as well. However, as WZ said, there may be differing circumstances for different companies. Keep in mind that this is both an accounting question and a legal one, and both industries have tendencies to be needlessly complex and overreaching, meaning they'll often apply an illogical rule to a situation or a broad stroke rule that doesn't fit your specific circumstances. That's why you ultimately need to talk to one of the people in that industry for your specific set of circumstances.
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  8. #7
    Senior Member Webzarus's Avatar
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    Quote Originally Posted by TheGAME1264, post: 245815
    What he said. That's why I also used the word "generally". I'm not sure whether or not there are site elements that are defined as capital costs. I don't think there are any myself, but again, I'm not a lawyer.

    I write everything off as expenses when it comes to my own sites, just because everything I do related to them could easily enough be justified as an expense (e.g. hosting...it's a "maintenance" cost). I have received legal advice stating that I'm doing this correctly as well. However, as WZ said, there may be differing circumstances for different companies. Keep in mind that this is both an accounting question and a legal one, and both industries have tendencies to be needlessly complex and overreaching, meaning they'll often apply an illogical rule to a situation or a broad stroke rule that doesn't fit your specific circumstances. That's why you ultimately need to talk to one of the people in that industry for your specific set of circumstances.
    I do know this... Talking with my lawyer a couple of years ago, he told me flat out to add a disclaimer to any legal or financial advise that I may put online... Be user there are those that will either interpret it incorrectly, or use it at face value, get busted... And come after you.

    He has actually successfully defended several clients in the past, for exactly that. So he told me cover your bases, especially when giving advice on legal and or tax issues... Just like patent trolls out there... Well, you just can't be too careful...

    Not that this is what's going on here ( not insinuating anything ), just pointing it the obvious ( to me ), and following what seems to be good legal advice from a friend.

  9. #8
    Unpaid WDF Intern TheGAME1264's Avatar
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    We're not the only ones that use it, either. Jonathan over at Plagiarism Today has a really good disclaimer where he makes it abundantly clear that he and his partner Patrick aren't lawyers (especially on the podcasts).
    If I've helped you out in any way, please pay it forward. My wife and I are walking for Autism Speaks. Please donate, and thanks.

    If someone helped you out, be sure to "Like" their post and/or help them in kind. The "Like" link is on the bottom right of each post, beside the "Share" link.

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  10. #9
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    thanks for the thoughts guys, don't know what I'ma do without you ..

  11. #10
    Unpaid WDF Intern TheGAME1264's Avatar
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    Yeah, we're friggin' awesome. Mostly me...WZ just rewords everything I say.
    If I've helped you out in any way, please pay it forward. My wife and I are walking for Autism Speaks. Please donate, and thanks.

    If someone helped you out, be sure to "Like" their post and/or help them in kind. The "Like" link is on the bottom right of each post, beside the "Share" link.

    My stuff (well, some of it): My bowling alley site | Canadian Postal Code Info (beta)


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