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Question: Semiconductor Industry: Expense or capitalize...
RP - Thread posted September 24, 2009 by David Hughes
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Title:
Question: Semiconductor Industry: Expense or capitalize second mask set
Content:
I've been asked to provide advice concerning the purchase of a 2nd mask set of an existing product. The mask set is for a use at 1. the same fab vendor or for a new fab vendor and it is moving from 130nm to 65nm.
What is industry practice: Capitalize or expense? (These mask set are very costly.)
Regards,
David Hughes
Comment
I have not worked on the semiconductor industry, but based on what I have found around the internet regarding what a "mask set" is, it looks like it is similar to molds and dies.
If it is in the preproduction stage, you might want to check out EITF 99-5. If not, then it would be considered a postacquisition cost. It will be difficult to determine whether the 2nd mask set is capitalizable or not without knowing the details, but based on what I understand, the 2nd mask set replaces the 1st mask set. The 1st mask set should be disposed, and the 2nd mask set capitalized based on remaining life of the machine (unless the mask set increases the life of the machine).
Again, as I have previously mentioned, there are a bunch of factors that needs to be considered. You might want to consider consulting a guide (i.e. GAAP guide, etc).