Top 100 SaaS Companies Survey on Cost Capitalization

This white paper presents the findings of the Top 100 SaaS Companies Survey, focusing on the capitalization of development costs and sales commissions. The survey, which includes data from over 100 publicly traded SaaS companies, highlights significant trends in how these companies account for their major expenditures. Notably, the percentage of companies capitalizing sales commissions has increased dramatically, rising from 22% in 2017 to 71% in 2020, largely due to the implementation of ASC 606. The paper details the rules governing the capitalization of development costs and commissions, explaining the implications of the new revenue recognition standard. It also analyzes capitalization practices based on company revenue, revealing that higher revenue companies tend to capitalize costs more frequently. Furthermore, the findings indicate disparities in capitalization practices among different auditors, emphasizing the need for SaaS companies to evaluate their accounting strategies in light of these trends and regulatory changes.