SplitIllustrative scenario
Building an internal copilot: the capitalizable split
The posting
An internal copilot build splits across capitalize and expense. Preliminary evaluation is expensed, development-window engineering and compute are capitalized, and post-go-live running is expensed. The capitalizable share is derived from measurable development-window activity, shown here as an illustrative range, not a fixed statistic ASC 350-40-25.
The three phases
- Preliminary: model evaluation and vendor selection, expensed ASC 350-40-25.
- Development window: building the copilot, integration and eval harness, capitalized.
- Post-implementation: running inference and maintenance, expensed ASC 350-40-35.
Illustrative capitalizable share of the build50 - 60%
CapitalizeExpense
SplitIllustrative example, not client data
CapEx / Balance sheet
OpEx / P&L
DrSoftware asset (intangible)$550,000
DrOperating expense$450,000
CrCash$1,000,000
Posts to
Primary sources
- [S1] KPMG: Hot Topic: Accounting for internal-use software (ASC 350-40) (US GAAP)
- [S4] Weaver: Navigating internally developed software costs: U.S. GAAP vs tax treatment (US GAAP)
Ledger current as of 2026-07-24. A position and a citation, not accounting advice. See how we cite.