Consultant's Notebook  
Accounting for Web Site Development Costs: EITF 00-2

A significant amount of software development at many companies creates or improves web sites. Even if the majority of this expense is within a company’s Internet division, many other business units may also have websites for both internal and external “customers.”  To provide guidance for the correct accounting classification of the costs for these projects, the American Institute of Certified Public Accountants (AICPA) published two relevant guidance documents, usually referenced by their identifiers: EITF 00–2 and SOP 98‑1.

Accounting standards such as these are a pain to interpret and a pain to apply! The process is a hornets' nest of buzz words for both the Accountants and the IT professionals. IT Jargon vs. CPA Jargon. Whose will win? How can we all understand each other? How can we communicate successfully?

It doesn't need to be adversarial. This report explains a methodology that leads everyone to a better understanding of both perspectives: Accounting and IT. The report shows a proven pathway to agreement on EITF 00–2 compliance! It works for companies both large and small. With this report the Accounting and IT staffs will receive a common language for the discussion. It won't be a win-lose but a win-win for you!

Arm yourself with this vital information before your next meeting. Need to prepare now? Download the report.

The recent accounting scandals have made it more imperative that businesses correctly apply the protocols for classifying business expenses. In the realm of internally developed software, there are existing standards for classifying these expenses. In considering the correct application of accounting standards to computer software development, a business must formulate procedures to ensure the correct application of standards. The Finance and Information Technology (IT) areas need to have a common basis for planning and accounting for the costs of software development projects.

AICPA Statement of Position 98–1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (SOP 98–1), gives definitive guidance for correct treatment of these costs. SOP 98–1 describes the allocation of project expenses for internal software development or purchase to either expense or capitalizable categories. A companion Consultant’s Note, Accounting for Software Development Costs: SOP 98–1, describes our report with processes for applying this standard.

However, subsequent to the issuance of SOP 98–1, the accounting standards boards decided that web site development and upgrade issues required additional guidance. Therefore the Emerging Issues Task Force (EITF) published the document EITF 00–2: Accounting for Web Site Development Costs. (EITF 00–2).

These documents are available from the AICPA. At the request of a Fortune 500 company, Christopher Technology Consulting examined the documents and formulated a common approach that both Finance and IT can use to guide their discussions.

Applying these standards is difficult for either Accounting or IT. But when the two staffs meet with dueling professional jargons, the result is often delayed projects, excess cost and much frustration. You can download our report on applying EITF 00–2 that gives you the roadmap and directions to achieving agreement that pleases both staffs without harming either the project's progress or its accounting.

General Applicability

EITF 00–2 does not give guidance for the costs of web site development for 7 major areas of website creation and maintenance. Do you know what they are? And where you can find that guidance? Our report lists these areas and the other standards (e.g. FAS 86, FIN 6, EITF 97-13) where you can get the necessary guidance.

The costs to develop a website are highly dependent upon the functionality, size and quality of the web site. Increased functionality, such as search engines, chat rooms, database access, purchase features such as shopping carts and credit card use, all increase development costs. Larger sites, with many different types of pages will cost more to develop. Finally, higher quality “look and feel” with higher resolution graphics and more complex navigation templates will increase cost.

Project Stages

EITF 00–2 divides the initial development of a web site into five stages:

  • Planning
  • Application and Infrastructure Development
  • Graphics Development
  • Content Development
  • Operating

These stages relate roughly to the project stages of SOP 98–1.

Key Considerations Covered in the Report

    Application and Infrastructure Development Stage

    • Key Assumptions
    • Hardware
    • Hosting
    • Domain Registration
    • Other Activities

    Content Development Stage

    • Initial Content Loading
    • Content Creation

    Operating Stage

    • Upgrades or Enhancements

    Other Key Issues

    • Graphics Versus Content
    • Accounting for Database Content and Collections of Information
      • Computer Files That are Essentially Films, Music, or Other Content

Next Steps

This Consultant Note is a summary of a report and presentation we use to help the staffs of Finance, Accounting and Information Technology improve their application of these accounting standards. To help you achieve better payoff from your internal web site development, download the report now.

For more help in succeeding where so many others struggle, contact us or email to

© Copyright 2009, Christopher Technology Consulting LLC


Home     Services     Case Studies     Biography     Contact Us
Christopher Technology Consulting, 1552 Lakeport Court, Virginia Beach, VA 23464
Voice: 757-373-1454 email: