Why payment to Software Engineers is not an expense for the current year? Is it because of the size of the expense? or some other rule that I am missing. Those employees are also paying taxes to those salaries as well. Isn't it? What is the catch? I'm confused.
Work on product is typically classified as R&D expense. R&D salaries are considered to be developing a capital asset that will yield returns for years. So the costs of it also are amortized over years. Bog standard accounting. The prior situation was actually an exception.