Technological feasibility is a key US GAAP recognition threshold for software that will be sold, leased, or otherwise marketed externally.
Before technological feasibility is established, qualifying creation costs are generally treated as research and development expense. After feasibility and before the product is available for general release, qualifying production costs may be capitalized.
What the threshold does
The threshold separates a high-uncertainty development period from a later period in which the software design has advanced far enough to support capitalization under the external-software model.
It is not the same as commercial success. A technically feasible product can still fail economically.
Why investors care
The timing of feasibility can materially affect reported earnings because an earlier threshold can move more development cost from current expense to an asset.
That makes policy, documentation, release cadence, and development process important when comparing software companies.
Do not confuse models
Technological feasibility is central to the US GAAP model for Software to Be Sold, Leased, or Marketed. It is not the current recognition test for Internal-Use Software under ASU 2025-06.
IFRS also does not use this US GAAP threshold verbatim; qualifying software generally follows IAS 38's development-recognition criteria.
Sources
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