How should capitalized costs of computer software developed for resale be amortized under U.S. GAAP?

Capitalized costs of computer software developed for resale should be amortized using either a percentage of revenue method or the straight-line method, as outlined in U.S. GAAP. This approach allows companies to match the amortization expense with the revenue generated from the software, reflecting the economic reality of how the software is utilized and generates income over time.

The percentage of revenue method is particularly relevant for software that is expected to generate varying levels of revenue during its life cycle, as it ties the amortization expense directly to the software's performance in the market. Conversely, the straight-line method provides simplicity and consistency, spreading the costs evenly over the useful life of the software.

This flexibility in choosing the amortization method is crucial because it allows companies to adopt the method that best reflects their particular business dynamics and financial reporting goals, thus providing more accurate financial statements to stakeholders as compared to a rigid approach that may not fit all situations.