Academic journal article Journal of Accountancy

Year 2000 Expenditures

Academic journal article Journal of Accountancy

Year 2000 Expenditures

Article excerpt

As the clock ticks past midnight on December 31, 1999, many software-driven systems may respond as though the year 1900 followed 1999, potentially wreaking havoc with normal operations in virtually every sector of the economy. Computers, manufacturing systems, elevators, vending machines--almost anything that depends on time and date--will be affected. (For additional discussion on the Year 2000 issue, see the articles beginning on page 33.)

Companies will have to spend a lot of money to avoid the problems that could occur if a system interprets 00 as 1900. The IRS has been looking at how companies treat such expenditures for tax purposes and soon may issue some guidance.

Under current law, most taxpayers deduct software development costs on a current basis in a manner consistent with revenue procedure 69-21 (1969-2 C.B. 303). The IRS is not expected to change that treatment. However, Year 2000 "fixes" will not be limited to software development. There will be other costs, such as hardware, labor and consulting, that may be more difficult to classify. …

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