4. Capitalized Software Development Costs

12 Months Ended

Oct. 31, 2020

Disclosure Text Block [Abstract]

4. Capitalized Software Development Costs

4. Capitalized Software Development Costs

PASSUR Software Development costs consist of the following as of October 31, 2020 and 2019:

	2020	2019
Software development costs, beginning balance	$ 23,732,000	$ 21,159,000
Additions	489,000	2,573,000
Impairment charge	(6,134,000)	-
Total capitalized software development costs	18,087,000	23,732,000
Less accumulated amortization	16,864,000	15,413,000
Software development costs, ending balance, net	$ 1,223,000	$ 8,319,000

The Company’s capitalization of software development projects was $489,000 and $2,573,000 for the year ended October 31, 2020 and 2019, respectively. Amortization expense related to capitalized software development projects was $1,451,000 and $2,396,000 for the year ended October 31, 2020 and 2019, respectively.

As of October 31, 2019, the Company had $973,000 of capitalized software development costs relating to projects currently still in development, therefore, are not yet subject to amortization. During the year ended October 31, 2020, the Company revised the amortization period for capitalized software development costs to 36 months, to more closely align with the estimated remaining useful life of these assets.

During the second quarter of 2020, due to the financial and economic hardships being experienced by airlines, airports and air transportation support vendors in the current COVID-19 environment, there was a sufficient amount of uncertainty surrounding the ability of our customers to continue to perform their contracts with the Company. In order to determine whether or not an impairment had occurred, the Company looked at existing contracted revenue, adjusted for future uncertainties, and compared those amounts with the net carrying value of the related capitalized development cost asset. Where the revenue amount was less than the net carrying value of the asset, we determined that an impairment had occurred. As a result of this exercise, during the second quarter of fiscal 2020, the Company wrote-off assets totaling $6,134,000, based on the assumption that the carrying value of the software capitalization should not exceed 100% of the committed contract values remaining.

As a result of the industry changes in response to the COVID-19 pandemic, the corresponding review conducted by the Company described above and the resultant write-offs taken during fiscal year 2020, the Company anticipates that its level of capitalized software development costs, including related amortization of such costs, will decrease in the future. In connection with the impairment analysis described above, the Company revised its estimate of the remaining useful life of the capitalized software development costs to three years.

The Company did not record any impairments related to capitalized software development projects in fiscal year 2019.