Capitalise
Capitalising means recognising qualifying AI development costs as an intangible asset on the balance sheet rather than expensing them. The asset is measured at the directly attributable cost incurred from the recognition date, capitalisation stops when the asset is ready for use, and the asset is then amortised over its useful life.
What capitalising does to the accounts
CAPITALISEThe cost is removed from the period's expenses and recorded as an asset. Current-year profit is higher than if the cost had been expensed; the balance sheet carries an intangible that unwinds through amortisation in later periods IAS 38§74.
Which costs enter the asset
Only the directly attributable costs of creating and preparing the asset, incurred from the recognition date, enter the carrying amountIAS 38§66. Under ASC 350-40, that is the qualifying application-development cost, coding, testing and directly associated payroll ASC 350-40350-40-25.
Start and stop dates
Capitalisation starts when the recognition criteria are first met, or when the probable-to-complete threshold is satisfied under ASU 2025-06, and stops when the asset is substantially complete and ready for its intended use. Spend after that point is operating cost, expensed IAS 38§71.
- 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