Read Apple's Decemer 29/06 10-Q filing carefully and you'll run into this bit:
Software Development Costs
Research and development costs are generally expensed as incurred. Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product's technological feasibility has been established and ending when a product is available for general release to customers pursuant to Statement of Financial Accounting Standards (SFAS) No. 86, Computer Software to be Sold, Leased, or Otherwise Marketed . In most instances, the Company's products are released soon after technological feasibility has been established. Therefore, costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally all software development costs have been expensed as incurred.
In 2004, the Company began incurring substantial development costs associated with Mac OS X version 10.4 Tiger (Tiger) subsequent to achievement of technological feasibility as evidenced by public demonstration in August 2004 and the subsequent release of a developer beta version of the product. During the first nine months of 2005, the Company capitalized $29.7 million of costs associated with the development of Tiger. In accordance with SFAS No. 86, amortization of this asset to cost of sales began in April 2005 when the Company started shipping Tiger and is being recognized on a straight-line basis over a three-year estimated useful life.
That's $30 million over nine months to bring out the "tiger" release - obviously the numbers on "Leopard" will be a year or more coming, but how about Vista? We know that took 12,000 plus people more than four years so the number should be quite impressive.
Alas Microsoft is not so forthcoming - but what they do say should have you wondering whether to cringe on their behalf or roll on the floor laughing. Read this carefully, it's from their November 26/06 10-Q filing:
We account for research and development costs in accordance with several accounting pronouncements, including SFAS No. 2, Accounting for Research and Development Costs , and SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed . SFAS No. 86 specifies that costs incurred internally in researching and developing a computer software product should be charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs should be capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached shortly before the products are released to manufacturing. Costs incurred after technological feasibility is established have not been material, and accordingly, we have expensed all research and development costs when incurred.
Let me repeat that: Microsoft says "We have determined that technological feasibility for our software products is reached shortly before the products are released to manufacturing."
So everything gets expensed as incurred -i.e. between 12 and 15 billion dollars over the longhorn development period just to get SP4 out the door - numbers that just beg someone to see how close to 200 times Apple's costs for "Leopard" Microsoft got with Vista.
The truly great thing about this, however, is that the feds accepted it - meaning that the next step for a truly creative Microsoft accountant has to be telling them the real truth: that Microsoft doesn't expect its products to demonstrate technical feasibility until after customers get them - thus enabling Microsoft to capitalize initial product revenue as a development expense for tax purposes.