Significant development uncertainty
Under ASU 2025-06, capitalisation is deferred while significant development uncertainty remains. That uncertainty exists where the software has novel, unique or unproven functionality with unresolved uncertainty after coding and testing, or where performance requirements are undefined or subject to major revisionS5. This is the condition that most directly gates frontier AI models.
What makes a model uncertain
The condition targets two situations: the software contains novel, unique or unproven functionality where uncertainty about whether it can be delivered persists even after coding and testing; or the performance requirements are not yet defined, or are still subject to major revision S5. A frontier model being trained to hit accuracy targets it has never demonstrated fits both.
Why committed funding does not override it
The probable-to-complete threshold requires that completion and intended use be probable, not merely funded. Significant development uncertainty holds that probability below the threshold, so capitalisation cannot begin even after the board has approved the budget ASU 2025-06. The gate is about technical outcome, not financial commitment.
Uncertainty unresolved → EXPENSEUncertainty resolved → CONDITIONAL
Documenting the judgement
Because this is a judgement, the file should record what the uncertainty was, what evidence resolved it, and the date it was resolved, since that date sets the start of capitalisation. Absent that record, the defensible default is to continue expensing until the uncertainty is demonstrably resolved.
- S5ASU 2025-06 on internal-use software costs, BDO (US GAAP). https://arch.bdo.com/new-asu-on-internal-use-software-costs-guidance
- S4FASB Accounting Standards Codification, PwC Viewpoint (US GAAP). https://viewpoint.pwc.com/dt/us/en/fasb/GAAP/Codification/Codification/228073.html