Current ASC 350-40
Stage-oriented analysis
Current U.S. GAAP uses the existing internal-use software model, including analysis of preliminary, application-development, and post-implementation activities.
Capital Asset AssessmentASC 350-40ASU 2025-06
Separate the service consumed from the software asset created.
Consulting-as-Code can produce software, workflows, structured business logic, and institutional-memory assets. Finance still has to determine which costs, if any, meet the applicable recognition and cost-eligibility requirements. This page is a framework for that assessment—not an accounting conclusion.
The finance question
1
Expense
Work consumed in the current period—such as preliminary analysis, training, and routine support.
2
Assess for capitalization
Direct costs of qualifying software development or enhancement when the applicable criteria are met.
3
Amortize
Recognized software asset cost allocated over its estimated useful life after it is ready for intended use.
Accounting framework
Current guidance and the upcoming ASU 2025-06 model are not the same test.
ASU 2025-06
Authorization, probable completion, uncertainty
After adoption, capitalization begins when management has authorized and committed funding and it is probable the project will be completed and used as intended, with significant development uncertainty considered. Effective for fiscal years beginning after December 15, 2027; early adoption is permitted.
MCOS cost map
Map the work before you map the accounting.
| MCOS activity | Finance question | Illustrative treatment posture |
|---|---|---|
| Discovery and requirements | Is the activity preliminary/research, or directly attributable to qualifying development? | Usually expense or assess based on facts |
| Workflow / protocol build | Does the work create or enhance software functionality? | Assess for capitalization |
| Integration and configuration | Is the cost directly attributable to preparing the software for intended use? | Assess for capitalization |
| Data conversion / migration | Is the work a separate conversion activity rather than development? | Separate analysis required |
| Training and enablement | Is the cost for user training or organizational adoption? | Generally expense |
| Maintenance and support | Is the work keeping an existing system operating rather than creating new functionality? | Generally expense |
Illustrative only. Accounting treatment depends on the specific arrangement, facts, accounting policy, applicable guidance, and auditor/adviser judgment.
Asset control test
The accounting follows what was actually built and who controls it.
Client ownership and portability do not automatically establish capitalization, but they are important facts when assessing the substance of the resulting software or intangible asset.
What software or functionality is actually being developed?
Who controls the resulting logic, workflows, and access rights?
Can the resulting asset be exported, reused, or operated independently?
When did management authorize and commit funding?
When did completion become probable and significant development uncertainty resolve?
Which costs are directly attributable to development versus training, maintenance, or other activities?
Evidence package
Make the capitalization conclusion reproducible.
Cost evidence
Invoices, internal labor records, third-party implementation costs, and cost classification.
Development evidence
Requirements, workflow definitions, testing, integration work, and readiness for intended use.
Management evidence
Authorization, committed funding, intended use, useful-life analysis, and management conclusion.
Control evidence
Ownership, access, exportability, version history, change records, and deployment posture.
Finance discipline
Do not sell capitalization. Build a defensible capitalization assessment.
MCOS can preserve the evidence around the work. Management and its accounting advisers determine the treatment.