background of development costs to be capitalized

Development costs are expenses incurred by a company during the process of creating or improving a product, process, or software. These costs can include research and development expenses, salaries and wages of employees involved in the development process, and other related expenses. In accounting, development costs can be capitalized if they meet certain criteria. The criteria for capitalization of development costs include: 1. Technological feasibility: The product or process being developed must have reached a stage where it is feasible to complete and produce it. 2. Intent to complete: The company must have the intention to complete the development process and use the product or process in its operations. 3. Ability to use or sell: The product or process being developed must have the ability to be used or sold in the market. 4. Resources available: The company must have the necessary resources, such as financial resources and technical expertise, to complete the development process. Capitalizing development costs allows companies to spread out the cost of development over the useful life of the product or process, rather than expensing it all at once. This can improve the accuracy of financial statements and provide a more accurate picture of the company's financial position.