Accounting for Software: Understanding CAPEX and OPEX

March, 2018


For IT managers, understanding the rules around accounting for software costs can be a confusing subject. This report provides a primer on the difference between capital expenditures (CAPEX) and operational expenditures (OPEX) and how they relate to accounting for software costs. We also outline how these principles vary according to the application development method that is used, whether a traditional waterfall approach or a newer process, such as agile development. Finally, we highlight the factors that drive business leaders to favor CAPEX or OPEX in accounting for software. (11 pp., 1 fig.)
[Research Byte]