Assume a company capitalizes the cost of an internal software development project. The software developers charge their time to the project for each hour they work on the project and their time is not billed to a customer (the software developed is capitalized as an asset). How does the company account for the personnel costs of exempt employees? I assume that it would be the payroll, benefits, and facilities cost (office space for the employee, etc) for the employee per year, divided by the number of normal work hours in a year, multiplied by the hours that the employee works on the project.
But what if the employee works 20% overtime on the project and bills every hour to the project, and the actual costs are over-allocated to the project so that the amount capitalized exceeds the actual costs of the employee (and facilities to support the employee) during the time the employee worked on the project?
Are the rules different for financial reporting and tax reporting?