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Author: mungofitch ✹🐝🐝🐝🐝 SILVER
SHREWD   😊 😞
Number: of 15062 
Subject: Re: Munger's beef with GAAP changes
Date: 08/16/2024 3:57 PM
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At one place I worked, I had multiple arguments with the CFO about this exact topic. My point was we would be doing software development, maintenance and administration for as long as the company was in business. And expensing the development costs each year was much more realistic than claiming they were longer term and could be amortized over multiple years. But the bottom line of his point was that doing so made the current years numbers look better. Seemed dishonest to me.

I've been in the exact same boat, and had that same discussion, with the same push back.

After many years of pondering the discussion, I concluded that the most realistic way do to it (not that we ever did it that way) was to expense maybe 1/2 to 3/4 of the ongoing "R&D" department expenses, but then to capitalize and depreciate the rest slowly over a VERY long lifetime. Some of the code I wrote was still making money 20-30 years later...but only a tiny fraction of it. Some had a little earning power after 2-3 bankruptcies of the company owning it at any given time.

Jim
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