The engine
The AI capitalisation decision tree
Head note
This is the full engine. Choose a framework and a cost line, answer the gate, and it routes to capitalise, expense or prepaid with the governing paragraph and a copy-ready verdict. The static reference matrix below records the default treatment for all eleven lines under both frameworks.
Balance sheet
CAPITALISE
Recognise the spend as an intangible asset and amortise it over its useful life.
phase boundary
phase boundary
Income statement
EXPENSE
Charge the spend to the P&L in the period it is incurred.
CostRouter
Select an AI cost line
Pick a cost line to route it to capitalise, expense or prepaid under IFRS.
Reference matrix: all cost lines, both frameworks
| Cost line | IFRS | IFRS refs | US GAAP | US GAAP refs |
|---|---|---|---|---|
| Pre-training compute | EXPENSE | IAS 38§54IAS 38§68 | EXPENSE | ASC 350-40350-40-25ASU 2025-06probable-to-complete |
| Fine-tuning compute | CONDITIONAL | IAS 38§57 | CONDITIONAL | ASC 350-40350-40-25ASU 2025-06probable-to-complete |
| Data acquisition and licensing | CONDITIONAL | IAS 38§25IAS 38§68 | CONDITIONAL | ASC 350-40350-40-25 |
| Data labelling and annotation | CONDITIONAL | IAS 38§57IAS 38§54 | CONDITIONAL | ASC 350-40350-40-25 |
| RLHF and alignment | EXPENSE | IAS 38§54 | EXPENSE | ASU 2025-06significant uncertaintyASC 350-40350-40-25 |
| Prompt and eval engineering | CONDITIONAL | IAS 38§57IAS 38§68 | CONDITIONAL | ASC 350-40350-40-25 |
| Trained model weights (the asset) | CAPITALISE | IAS 38§57IAS 38§66 | CAPITALISE | ASC 350-40350-40-25 |
| Cloud and hosting implementation | EXPENSE | IAS 38§68 | CONDITIONAL | ASU 2018-15350-40-15ASC 350-40350-40-25 |
| Inference and serving | EXPENSE | IAS 38§68 | EXPENSE | ASC 350-40350-40-25 |
| Third-party AI APIs | EXPENSE | IAS 38§68 | EXPENSE | ASU 2018-15350-40-15 |
| MLOps and data pipeline | CONDITIONAL | IAS 38§57IAS 38§68 | CONDITIONAL | ASC 350-40350-40-25 |
Scroll sideways for the US GAAP columns →
Conditional means the outcome turns on whether the recognition test in the gate column is met. Open a cost line for the framework-by-framework detail.
Sources of record
- 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
- S3Applying ASC 985-20 and ASC 350-40 to software costs, Crowe (US GAAP). https://www.crowe.com/insights/how-to-apply-asc-985-20-asc-350-40-software-costs
- S4FASB Accounting Standards Codification, PwC Viewpoint (US GAAP). https://viewpoint.pwc.com/dt/us/en/fasb/GAAP/Codification/Codification/228073.html
- S5ASU 2025-06 on internal-use software costs, BDO (US GAAP). https://arch.bdo.com/new-asu-on-internal-use-software-costs-guidance