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Posted by Mark A on March 7, 2007, 11:21 pm
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Assume a company capitalizes the cost of an internal software development
project. The software developers charge their time to the project for each
hour they work on the project and their time is not billed to a customer
(the software developed is capitalized as an asset). How does the company
account for the personnel costs of exempt employees? I assume that it would
be the payroll, benefits, and facilities cost (office space for the
employee, etc) for the employee per year, divided by the number of normal
work hours in a year, multiplied by the hours that the employee works on the
project.
But what if the employee works 20% overtime on the project and bills every
hour to the project, and the actual costs are over-allocated to the project
so that the amount capitalized exceeds the actual costs of the employee (and
facilities to support the employee) during the time the employee worked on
the project?
Are the rules different for financial reporting and tax reporting?
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