In most cases, computer software has the ability to be considered an asset that benefits a company over the long-term. Software falls under the same category as fixed assets, such as buildings or property. However, there have been several cases where software cannot be deemed a long-term asset.
Generally, intangible assets can be defined as the non-physical assets that are utilized over a long period. Often, these are items such as intellectual property. It is difficult to attach value to intangible assets due to future uncertainty of benefits.
Conversely, tangible assets fall under the category of both real and measurable. These are assets such as property and equipment, or a PP&E.
In most situations, computer software is considered an intangible. However, there are specific exceptions to the rule that allows computer software to be classified as tangible or PP&E.
Here are a few accounting rule exemptions of when and how computer software can be categorized as a PP&E:
Federal Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) No. 10, Accounting for Internal Use Software.4
Governmental Accounting Standards Board (GASB) Statement No. 51, Accounting and Financial Reporting For Intangible Assets.5
The bookkeeping standard for most types of assets to be considered a PP&E they have to have a useful asset lives of over 2 years, the asset will not be sold as part of normal operations, and they were created only for the use of the entity.
There are specific rules that must be considered when determining if the software can be profited as a PP&E or if it should be expensed. Should the specific software satisfy the guidelines to be considered part of property, plant, or equipment, then it can be considered a PP&E. Referencing SFFAS no. 10:
"Entities should capitalize on the cost of software when such software meets the criteria for general property, plant, and equipment (PP&E). General PP&E is any property, plant, and equipment used in providing goods and services."