Reference / vocabulary

Glossary

Head note

The vocabulary of AI capitalisation, defined tightly and anchored to the governing standard. Terms with a dedicated definition page are linked; the rest are defined here. Together they cover the language a controller, auditor and FP&A team need to route any AI cost line with precision.

Terms

AI capitalisation: Recording internal AI investment and spend as an intangible asset on the balance sheet rather than expensing it through the profit and loss account.
Capitalise versus expense: The core distinction: capitalising records qualifying cost as an asset amortised over time; expensing charges cost to the P&L in the period incurred.
Intangible asset: An identifiable non-monetary asset without physical substance that the entity controls and from which future economic benefits are expected, per IAS 38.
Internal-use software: Software developed or obtained solely to meet the entity's own internal needs, with no substantive plan to market it externally, governed by ASC 350-40.
Technological feasibility: The point under ASC 985-20 when planning, design, coding and testing establish that a product can be produced to meet its design specifications.
Cloud computing arrangement: A hosting arrangement in which a customer accesses software as a service; ASU 2018-15 addresses when its implementation costs may be capitalised.
Research phase: The part of an internal project aimed at new knowledge before a specific feasible application exists; all research expenditure is expensed under IAS 38.
Development phase: The application of research findings to a planned asset; costs may be capitalised only once all six IAS 38 recognition criteria are met.
Six recognition criteria: The IAS 38 paragraph 57 conditions for capitalising development cost: feasibility, intention, ability, probable benefit, resources and reliable measurement.
Preliminary project stage: The conceptual ASC 350-40 stage of requirements and alternatives evaluation; costs are expensed as incurred.
Application development stage: The ASC 350-40 stage of coding, installation and testing where qualifying internal-use software costs are capitalised.
Post-implementation stage: The ASC 350-40 stage after software is in service; training, maintenance and operation costs are expensed.
Probable-to-complete threshold: The ASU 2025-06 recognition threshold: capitalisation begins when funding is committed and completion plus intended use are probable.
Significant development uncertainty: The ASU 2025-06 condition that defers capitalisation where software has novel or unproven functionality or undefined performance requirements.
Amortisation: The systematic allocation of the depreciable amount of a finite-life intangible over its useful life.
Useful life: The period over which an asset is expected to be available for use; for AI models it is typically short and must be evidenced.
Impairment: A write-down recognised when an asset's carrying amount exceeds its recoverable amount, for example a superseded model.
Prepaid: An asset representing spend paid for but not yet consumed, such as reserved compute or a term data licence, released as used.
Directly attributable cost: The cost necessary to create and prepare an asset to operate as intended, the only cost that enters an internally generated intangible's carrying amount.
Fine-tuning: Adapting an existing base model to a defined task or domain; can reach development phase and be capitalised where the recognition tests are met.
Pre-training: Building general model capability from scratch; usually reads as research and is expensed because no specific feasible asset yet exists.
RLHF: Reinforcement learning from human feedback, used to align model behaviour; usually expensed as iterative, uncertain work.
Carrying amount: The amount at which an asset is recognised on the balance sheet after deducting accumulated amortisation and impairment.

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