Prompt and eval engineering
Prompt engineering and evaluation work split by durability. Routine, iterative prompt tuning is a period cost. A durable evaluation harness built to a specification, that the entity controls and reuses, can qualify as internal-use software under ASC 350-40 or a development-phase intangible under IAS 38.
Routing by framework
A durable evaluation harness built for a specific model can qualify as a development-phase asset; iterative prompt tuning is generally a period cost.
An eval harness meeting the internal-use software definition can be capitalised in the application-development stage; routine prompt iteration is expensed.
Prompts: usually a period cost
Prompt tuning is typically continuous refinement that does not create a separable, controlled asset with a measurable useful life, so it is expensed as incurredIAS 38§68. Where a prompt library is embedded in and inseparable from a qualifying software build, its directly attributable development cost follows that build.
The eval harness as internal-use software
A reusable evaluation harness, a scoring pipeline, a benchmark suite and its tooling can meet the internal-use software definition. Built in the application-development stage to a defined specification, its qualifying costs can be capitalised ASC 350-40350-40-25.
An entity builds a reusable evaluation harness that scores model outputs against a fixed rubric across releases. The scoped, funded build of the harness is capitalised as internal-use software; day-to-day prompt adjustments to individual features are expensed. All figures are illustrative.
- S1IAS 38 Intangible Assets, IFRS Foundation (IFRS). https://www.ifrs.org/issued-standards/list-of-standards/ias-38-intangible-assets/
- S2Handbook: Software and website costs (ASC 350-40 internal-use software), KPMG (US GAAP). https://kpmg.com/us/en/frv/reference-library/2026/handbook-software-website-costs.html