Prepaid
A prepaid asset carries spend the entity has paid for but not yet consumed, such as reserved compute capacity or a term data licence. It is not capitalisation of a developed asset; it is a timing device that defers a cost until the underlying service or right is delivered, then releases it to expense or into a qualifying asset.
What makes spend a prepayment
PREPAID A prepayment arises where the entity has an asset, a right to receive future goods or services it has paid for. It is recognised until the goods or services are received, at which point the cost is recognised in profit or loss or capitalised into a qualifying assetIAS 38§70.
How it differs from capitalising
Capitalising recognises the cost of an asset the entity has built or controls; prepaying recognises a right to a future service. A prepaid GPU reservation is not a model asset; it becomes expense or part of the model cost only when the compute is consumed, depending on the activity it is consumed on.
An entity prepays for a block of reserved GPU capacity spanning two reporting periods. At period end, the unused capacity is carried as a prepayment. As it is consumed, the cost follows the activity: research use expenses, qualifying development use capitalises. All figures are illustrative.
- S1IAS 38 Intangible Assets, IFRS Foundation (IFRS). https://www.ifrs.org/issued-standards/list-of-standards/ias-38-intangible-assets/
- S4FASB Accounting Standards Codification, PwC Viewpoint (US GAAP). https://viewpoint.pwc.com/dt/us/en/fasb/GAAP/Codification/Codification/228073.html