Final answer:
U.S. GAAP permits the capitalization of software development costs after the software reaches the point of technological feasibility, affecting the timing of financial statement expenses.
Step-by-step explanation:
U.S. GAAP allows development costs to be capitalized when software reaches the point of technological feasibility. This is the stage at which a company has completed all planning, designing, coding, and testing activities that are necessary for the software to meet its design specifications. After the software reaches this point, the costs incurred to complete the production of the ready-for-sale product can be capitalized on the balance sheet rather than expensed immediately.
Capitalizing development costs can significantly affect a company's financial statements, as it changes the timing of expense recognition. Before reaching technological feasibility, all related costs must be expensed as they are incurred. After the software is available for general release to customers, the capitalized costs are then amortized over the product's expected useful life.