In many companies, agile software development is misunderstood and misreported, causing taxation increases, higher volatility in Profit and Loss (P&L) statements and manual tracking of programmer hours. One large company’s confused finance department expenses all agile software development and capitalizes waterfall development; projects in this company that go agile see their headcounts cut by 50%. This discourages projects from going agile.
Scrum’s production experiment framework can align well with the principles of financial reporting. In this article, the author explains the basics of capitalization and expensing, and offers a financial framework for capitalizing agile projects that can be understood by both accountants and agile teams. Continue reading