FrameworksFinance & CostSoftware Capitalization

Capitalize software from the work teams did, not from quarter-end memory.

“Which development work can we capitalize, and can we prove it?”

Every requirement of ASC 350-40 — now amended by ASU 2025-06 — plus ASC 985-20 for software you sell and IAS 38 for IFRS reporters, each mapped to where it lives in Dotwork. Capital time is recorded against the epics, features and initiatives teams actually worked on, priced at loaded cost, signed off and amortized in the same book as the budget and the portfolio. Finance’s policy is applied as written, and every entry shows the rule behind it. Finance compares the transition methods before choosing how to move to the new standard. Dotwork classifies, checks and drafts; finance makes the judgments. And TBM, asset management and financial controls draw on the same entries.

See Software Capitalization on your dataAll frameworks

Runs in

Covers

ASC 350-40 · ASU 2025-06 · IAS 38

The pressure

Capitalization is decided at quarter-end, from memory.

Engineers are asked to reconstruct how they spent the last three months. Finance applies one percentage to a whole team because the real split isn’t available. The work lives in the delivery tools, the labor cost in payroll, the policy in a memo and the schedule in the fixed-asset system — and the auditor asks for the thread between them. Now the standard is changing too.

What it looks like today

  • Timesheets reconstructed at quarter-end
  • One capital percentage applied to a whole team
  • Classifications that move when someone edits a ticket
  • Amortization schedules kept in a side spreadsheet
  • No plan yet for the move to ASU 2025-06

Full coverage

Every rule and every kind of software, through to amortization.

Internal-use software, software you sell, cloud implementations and IFRS — each requirement is mapped to the labor, portfolio and ledger records it depends on. Finance sets the policy; Dotwork applies it and keeps the evidence.

Built for ASC 350-40 as amended by ASU 2025-06 · ASC 985-20 · IAS 38

Internal-use software

ASC 350-40, as amended by ASU 2025-06.

  • Authorization and committed fundingThe approval and its date, from Fund the Work in Strategic Portfolio Management
  • Probable-to-complete thresholdA dated assessment on each initiative, with the evidence behind it
  • Significant development uncertaintyHeld open on the initiative until coding and testing resolve it
  • Eligible labor and outside servicesWorkforce & Labor, with worker type deciding what counts
  • Ready for intended useThe in-service date that starts amortization

Cloud and other software

Hosting arrangements, websites and software you sell.

  • Implementation costs in hosting arrangementsSpread over the hosting term by Contract Spreader
  • Website developmentThe same rules and records, now that it sits inside ASC 350-40
  • Software to be sold — ASC 985-20Technological feasibility recorded as a dated milestone on the product
  • Which rule appliesEach product and initiative tagged internal-use or to be sold

IFRS — IAS 38

Research, development and the six criteria.

  • Research phaseResearch work tagged and expensed by rule
  • Six development-phase criteriaEach criterion evidenced on the initiative, with its date
  • Reliable measurement of costLabor from rate cards, reconciled to payroll
  • US GAAP and IFRS togetherBoth rule sets on the same work, reported side by side, never added

Agile delivery

Capitalization the way software is built now.

  • Epics and features as the unitClassification set on the epic, feature or initiative
  • Mixed work in one periodOne allocation split between capital and operating
  • Phase-based or object-based rulesChosen per kind of work, not once for the company
  • Effort without timesheetsPercent of time per person per period, seeded from team capacity

Evidence and control

What the auditor asks for, kept as you go.

  • Sign-offDraft, submitted, approved — with who approved it and when
  • Segregation of dutiesNobody approves their own time
  • Classification historyFixed once submitted; a later edit never restates a past period
  • Audit exportPerson, work item, period, share, classification and approver

Plan, books and reporting

Where capitalization meets the money.

  • Capital mix in the planPlan the Year, compared as scenarios before you commit
  • Capital labor at loaded costCost the Labor, by role and location
  • AmortizationDepreciation & Amortization runs each schedule at every close
  • Capital and operating splitTrack the Variance, traced to the GL lines behind it
  • Cost, amortization and book valueReported from the same book as fixed assets

What changes

What changes.

Timesheets reconstructed after the fact

Time allocated to the work each period, and signed off

A team-wide capital percentage

A classification for every person, work item and period

Policy in a memo, applied by hand

Finance’s rules applied to the work, with the rule shown on every entry

Capitalization apart from the plan

The capital mix planned, tracked and amortized in the same book as the budget

Capital labor, evidenced

Planned, delivered and booked labor — before a dollar is capitalized.

Capitalization starts with labor, so start with the three numbers behind it. The plan prices capital work from rate cards. The delivery record shows who worked on which epic, feature or initiative, signed off by an approver. The ledger books the payroll. Dotwork shows the three side by side for every team, with its cost basis, and applies finance’s rules to what the work evidences — so the gap between plan, work and books is explained before the close, not during the audit.

Where other tools stop

Engineering analytics tools estimate capital effort from tickets but stop short of the ledger. Fixed-asset systems amortize what they are given but cannot show the work behind it. Here the work, the labor cost and the schedule are one record.

Flexed to how you run

Your policy, applied to how each team delivers.

The standards set the principles. Your accounting policy sets the detail. Dotwork applies the policy finance writes — and adapts to how each team delivers — without losing the evidence.

Your policy, as written

Finance sets which kinds of work, phases, worker types and thresholds capitalize. Dotwork applies the rules and shows which one set each entry.

Classify the way you deliver

By phase for stage-gated projects, by work item for epics and initiatives, or entry by entry where work is mixed — chosen for each kind of work.

US GAAP, IFRS or both

Run ASC 350-40 and IAS 38 on the same work and report each on its own, never added together.

No timesheets required

People record a share of their time per period, seeded from team capacity and signed off — no hour-by-hour entry.

The ASU 2025-06 transition

The project stages are gone. Past periods keep them.

The FASB issued ASU 2025-06 in September 2025. It applies to annual periods beginning after December 15, 2027, and can be adopted early. Dotwork updates the reference rules and proposes how your records move; finance chooses the transition method and approves every change. Entries already submitted keep the classification they were made under.

The three project stages removed from ASC 350-40

Phase rules kept for past periods; new work classified on the initiative against the new threshold

Capitalization begins once management authorizes and commits to funding

The funding approval and its date read from the portfolio, not typed into a spreadsheet

A probable-to-complete threshold, not met while significant development uncertainty remains

A dated assessment on each initiative, with the evidence that resolved the uncertainty

Prospective, modified or retrospective transition

Each method compared as a scenario in Plan the Year before finance chooses

ASC 360-10 disclosures extended to all capitalized internal-use software

Cost, amortization and book value reported from the same book as fixed assets

Website development guidance moved from ASC 350-50 into ASC 350-40

Website work classified under the same rules and on the same records

Every framework, one model

The capital number agrees everywhere it appears.

Capitalization touches finance, engineering, the portfolio and audit — usually through four tools and a spreadsheet. Here they all read the same time entries, approvals and schedules.

IT spend taxonomy

TBM

Capital and operating spend are kept apart from the ledger to the towers, and amortization is allocated like any other cost.

Explore TBM

SOX · COSO

Financial Controls

Sign-off and segregation of duties on every entry give control testing the evidence it asks for.

Explore Financial Controls

Funding value streams, not projects

Lean Portfolio Management

The funding decision on the portfolio sets when capitalization can begin.

Explore Lean Portfolio Management

Scaled Agile’s operating model for AI

AI-Native SAFe

Epics and features carry their classification, so an increment’s capital work is known when it is planned.

Explore AI-Native SAFe

Activity-based costing · rolling forecasts · Beyond Budgeting

Cost & Planning Methods

The capital mix is planned on the same drivers and rolling forecasts as the rest of the budget.

Explore Cost & Planning Methods

ISO/IEC 19770 · licenses, contracts and renewals

IT Asset Management

Once in service, capitalized software becomes an asset with an owner and a useful life.

Explore IT Asset Management

AI-native capitalization

Rules applied to every entry. Judgments left to finance.

Classifying entries, chasing sign-offs, pricing time and running schedules are handled for you. The judgments the standards ask for — when funding was committed, whether a project is probable to complete, what the useful life is — stay with finance and the people who own the work. Every change is logged.

Capitalization Classifier

Every new entry

Applies finance’s rules to each time entry — by phase, by work item or entry by entry — and records which rule set it.

What you get
Every entry classified, with the rule behind it
Where you decide
Finance owns the rules; people can change only their own drafts

Sign-off Guard

Every submission

Routes entries to the named approver, stops anyone approving their own time and warns when no approver is set.

What you get
Approved entries with who approved them and when
Where you decide
Approvers are named by finance

Threshold Watch

Every funding or scope change

Flags initiatives that are funded but have no probable-to-complete assessment, and capital time logged before the date the threshold was met.

What you get
Initiatives and entries that need a judgment
Where you decide
Finance and the initiative owner decide

Rate Card Engine

Every close

Prices approved capital time at loaded cost by role and location.

What you get
Capitalizable labor by work item and period
Where you decide
Rate cards stay with finance

Labor Reconciler

Every close

Lines up planned, delivered and booked labor so capital labor ties to payroll before it is booked.

What you get
Gaps between plan, work and payroll, by team
Where you decide
Team leads explain their gaps

Depreciation & Amortization

Every close

Starts amortization from the in-service date and runs each schedule with the rest of the book.

What you get
Period amortization by asset, ready to allocate
Where you decide
Finance sets useful lives and approves changes

Standard Version Mapper

New or amended standard

Compares your rules with the amended standard, proposes the changes and models each transition method side by side.

What you get
A transition comparison and the rule changes behind it
Where you decide
The controller approves every change

Readout Builder

Before each close or audit

Drafts the capitalization schedule and the audit export from approved entries, quoting only figures the book computed.

What you get
A schedule and an export that tie to the ledger
Where you decide
Finance reviews before anything is shared

Where it runs in Dotwork

Software Capitalization is a view, not another tool.

Dotwork does not ask you to adopt a new method. The framework becomes a view over the same model these solutions already read and write.

Fund & Optimize

Budgeting & Forecasting

“Can we still move money before the period closes?”

Explore

Fund & Optimize

Workforce & Labor

“Do we have the people we funded?”

Explore

Fund & Optimize

Cost Allocation

“Where does the money actually go — and can I trust the number?”

Explore

How it compares

From funding approval to amortization, on one set of entries.

Engineering analytics tools estimate capital effort from tickets. ERP fixed-asset modules and spreadsheets carry the schedule. Capitalization on Dotwork covers the whole rule set, from funding approval to amortization, and connects it to the rest of the operating model.

CapabilityEngineering analytics & cap toolsERP fixed assets & spreadsheetsCapitalization on Dotwork
Capital effort from the work, not reconstructed timesheets
Classification per person, work item and periodPartly
Sign-off with segregation of dutiesPartlyPartly
Past periods protected from reclassificationPartlyPartly
Labor at loaded cost, tied to payrollPartlyPartly
Amortization from the in-service date
US GAAP and IFRS on the same workPartlyPartly
ASU 2025-06 transition methods compared before you choosePartly
Capital mix planned before you commitPartly
Wired to the portfolio, budgets and architecture

Who it is for

Who opens it, and what they ask.

Controller

“Can we show the auditor how every capitalized dollar was classified, and by whom?

CFO

“What is our capital mix this year, and what will amortization do to next year?

Engineering leader

“How do we get capitalization right without asking engineers for timesheets?

Portfolio office

“Which funded initiatives meet the threshold to capitalize, and since when?

Internal audit

“Who approved this entry, and could they approve their own?

FP&A

“How does capitalized labor flow into the forecast and the plan?

Before you buy

Three questions to ask any Software Capitalization platform.

How to get a number instead of a pitch.

1

“Pick any capitalized dollar. Who worked on what, and who approved it?”

Good answer · The person, the work item, the period, the classification, the rate and who approved it.

Bad answer · A team percentage and a spreadsheet.

2

“What happens to last quarter when a ticket is reclassified?”

Good answer · Nothing. Submitted entries keep the classification they were made under.

Bad answer · The report recalculates and last quarter’s number moves.

3

“How will you handle ASU 2025-06?”

Good answer · The new threshold on each initiative, and the transition methods compared before finance chooses.

Bad answer · Rename the phases and carry on.

More in Finance & Cost

Same model. Next framework.

TBM

IT spend taxonomy

Explore

FinOps & FOCUS

Cloud accountability and billing data

Explore

Tokenomics

FinOps for AI · token and model spend

Explore

IT Asset Management

ISO/IEC 19770 · licenses, contracts and renewals

Explore

Cost & Planning Methods

Activity-based costing · rolling forecasts · Beyond Budgeting

Explore

Finance & Cost

The standards finance and IT finance use to say what technology costs and who uses it.

The model underneath

Every module makes the next one smarter.

Steer, Fund & Optimize and Govern & Deliver all read and write the same Enterprise Operating Model. The first module you license builds the model. Every module after it adds context instead of another silo — and Dotwork AI reads all of it, stopping where the decision is yours.

See the Enterprise Operating Model

Be Decisive.Build Fast.Connect Everything.

Start Connecting
Dotwork

The living model of your organization

Twitter•LinkedIn•YouTube
SOC 2TYPE IIISO270012022GDPRCOMPLIANT

Solutions

Frameworks

Platform

Resources

Why Dotwork

© 2025-2026 Dotwork, Inc. All rights reserved.