Capitalized Software Development Costs

12 Months Ended

Oct. 31, 2021

Notes

Capitalized Software Development Costs

4.  Capitalized Software Development Costs

PASSUR Software Development costs consist of the following as of October 31, 2021 and 2020:

	2021	2020
Software development costs, beginning balance	$ 13,671,000	$ 23,732,000
Additions	-	489,000
Write off of fully amortized projects	-	(4,416,000)
Impairment charge	-	(6,134,000)
Total capitalized software development costs	13,671,000	13,671,000
Less accumulated amortization	12,933,000	12,448,000
Software development costs, ending balance, net	$ 738,000	$ 1,223,000

The Company’s capitalization of software development projects was $0 and $489,000 for the year ended October 31, 2021 and 2020, respectively. As a result of business conditions in the aviation industry surrounding the COVID-19 pandemic, the Company’s software efforts were concentrated in the areas of maintenance of existing products.  Amortization expense related to capitalized software development projects was $485,000 and $1,451,000 for the year ended October 31, 2021 and 2020, respectively.  Certain reclassifications were made to the fiscal year 2020 presentation to recognize fully amortized projects that were previously written off.

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

PASSUR Aerospace, Inc. and Subsidiary

Notes to Consolidated Financial Statements (continued)

4. Capitalized Software Development Costs (continued)

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 continue to 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.