Commitment vs consumption
The core buyer-side axis: a signed commitment is not consumption. Committing to future capacity creates a prepaid asset or an executory contract, while consuming capacity creates an expense, a cost of revenue, or, in a build window, a capitalized asset. Reading your instrument on this axis decides whether it hits the balance sheet or the P&L first ASU 2018-15.
Why the distinction decides the posting
Buyers routinely book the full value of a multi-year commitment as the period's expense. That is wrong. At signing you have consumed nothing; you hold a right to future capacity. The commitment books as prepaid (if paid) or stays off-balance-sheet as an executory contract (if unpaid), and only actual consumption hits the P&L.
Reading each side
- Commitment: reserved GPU capacity, prepaid credits, committed-use plans. Prepaid asset or executory contract.
- Consumption: on-demand inference, drawn-down capacity, rented model calls. Expense or cost of revenue, or capitalized in a build window.
Posts to
Primary sources
- [S2] KPMG: Cloud computing implementation costs post ASU 2018-15 (US GAAP)
- [S1] KPMG: Hot Topic: Accounting for internal-use software (ASC 350-40) (US GAAP)
Ledger current as of 2026-07-24. A position and a citation, not accounting advice. See how we cite.