Effective capitalization of non-resource costs is essential for ensuring accurate financial reporting, maintaining compliance with accounting standards, and maximizing the value of capital investments. Capitalizing non-resource costs — such as equipment purchases, software licenses, or external consultancy fees — ensures that these expenses are allocated correctly over time rather than being fully expensed upfront. This approach ensures cost capitalization based on a few rules.

To ensure accurate capitalization of non-resource costs, you need to ensure the following:

• Project Capitalization Eligibility – The project must be set as eligible for capitalization, meaning it has been explicitly marked as a capital investment rather than an operational expense, ensuring that costs associated with it can be capitalized in line with financial policies and accounting standards.

This article provides guidance on setting up capitalization based on simplified model. It also explains capitalization calculations for both non-resource cost forecasts and actuals.

Note: Amortization feature supported only when using Comprehensive Capitalization Model.

For a non-resource cost to be capitalized, the project it is posted to must be configured as eligible for capitalization.

The following values can be set either from the Project Details page or through the Project Details bulk edit functionality:

1. Capitalization Eligibility

   • Set the Is Eligible to Capitalize Costs flag to ‘Yes’ if the project is eligible for capitalization.

2. Implementation Date or End date ( depending on configuration)

   • Set an Implementation Date to the project. This date is crucial for determining when capitalization ends (this rule does not apply to manually posted actuals).

   • Set an End Date to the project. This date is crucial for determining when capitalization ends (this rule does not apply to manually posted actuals).

As outlined in The Capitalization Process: How It Works article, the capitalization process determines the capitalized amounts for financial records based on predefined rules.

A forecast record will be capitalized only if all the following conditions are met:

• The project is set as eligible for capitalization.

• The financial date of the forecast falls:

  • After the Capitalization Lock Date – Forecasts before this date are locked and cannot be capitalized.

  • Before the Project Implementation Date or Project End Date ( Based on configuration) – Forecasts beyond this date are considered operational costs.

  • Within an open financial period – Forecasts in closed or locked periods will not be processed for capitalization.

• The expense type linked to the forecast has a capitalization percentage greater than 0%.

If a forecast meets all the above conditions, capitalization amounts are determined as follows:

• Manually Entered or Bulk-Edited Forecasts using the 'Financial Forecast Bulk Edit' functionality:

  • The system applies the capitalization percentage defined in the expense type configuration.

• Forecasts Uploaded via 'Non-Resource Actuals and Forecasts' bulk edit:

  • The capitalization percentage value provided in the upload file overrides the expense type settings, ensuring flexibility in financial adjustments.

An actual record will be capitalized only if all the following conditions are met:

• The project is set as eligible for capitalization.

• The actual cost has been recorded using the Financial Actuals Bulk Edit or Non-Resource Actuals & Forecast bulk edit file.

  • Manually entered actuals are not eligible for capitalization, as these records automatically default to a 0% capitalization percentage. The capitalization percentage for actuals is indeed determined explicitly at the point of entry via the Financial Actuals Bulk Edit or Non-Resource Actuals & Forecast bulk edit file, ensuring compliance with financial policies and contractual agreements.

  • Please note the Cap % value formats differ between the two bulk edit files:

    • Financial Actuals Bulk Edit:

      • The value must be between 0 and 100. or 0% and 100%

        • 0 or 0%= Not capitalizable

        • 100 or 100% = Fully (100%) capitalizable

        • Example: 60 or 60% = 60% capitalizable

    • Non-Resource Actuals & Forecast Bulk Edit:

      • The value must be between 0 and 1.

        • 0 = Not capitalizable

        • 1 = Fully (100%) capitalizable

        • Values must be entered as decimals (e.g. 0.6 = 60% capitalizable).

• The financial date of the actual must be:

  • After the Capitalization Lock Date – Actuals posted before this date are locked and cannot be capitalized.

  • Within a locked financial period – Only actuals posted in a closed financial month will be capitalized. If the period is still open, the actuals will not be processed for capitalization.

• The capitalization percentage value provided in the upload file overrides the expense type settings, ensuring flexibility in financial adjustments.

• Capitalizable actuals can be posted post Implementation/End date.

If an actual meets all the above conditions, the capitalization amount is determined as follows:

• The capitalization percentage used to calculate the capitalization amount is the percentage specified at the time the record was uploaded.

• If no capitalization percentage is provided in the upload file, the actual record is automatically classified as OpEx and will not be capitalized.