Accurately capitalizing resource costs is essential for ensuring that project labor expenses are correctly allocated as capital expenditure (CapEx) rather than operational expenditure (OpEx). Unlike non-resource costs, resource cost capitalization is tied to the way people’s time and effort are allocated to projects.

Before configuring resource capitalization, it’s important to understand the key differences between capitalizing resource forecasts and resource actuals:

• Resource Forecast Capitalization – Based on the role assigned to a resource when they are allocated to a project. The forecasted allocation for that role is capitalized only if:

  • The role is set as capitalizable.

  • Resource is on capitalizable rate card.

  • The project and financial setup allow for capitalization.

  • The capitalization profile defines how much of the role’s time is capitalized.

  • Forecast is within project start/implementation date or project start/end date (based on configuration).

  • Expense type is set as capitalizable.

• Resource Actuals Capitalization – Based on timesheet entries. A timesheet entry will be capitalized only if:

  • Resource is on capitalized rate card

  • The project and financial setup allow for capitalization.

  • The capitalization percentage of expense type associated to the resource rate card defines how much of the time booked is capitalized.

  • Timesheet falls within project start/implementation dates or start/end dates (depending on configuration).

This article provides step-by-step guidance on configuring resource forecast and actuals capitalization, outlining the necessary system settings, how to define capitalizable roles, and how capitalization amounts are calculated to ensure accurate financial reporting and compliance with capitalization policies.

Before setting up capitalization calculations, the following configurations must be in place for both resource forecasts and resource actuals capitalization.

Each resource is assigned a rate card that defines their financial rates — hourly, daily, or monthly — based on their role, skills, or services.

To ensure accurate capitalization of resource costs, the rate card assigned to a resource must be set as capitalizable if their work is expected to contribute to capital expenditure. Since rate cards define the cost of a resource based on factors such as role, location, seniority, or contract type, not all rate cards should be capitalized. Typically, only rate cards used for resources performing capitalizable work — such as those engaged in development, implementation, or asset creation — should be set as capitalizable. Rate cards associated with operational functions, overhead roles, or non-capitalizable activities should remain non-capitalizable to ensure accurate financial reporting.

For detailed guidance on managing rate cards, including setting them as capitalizable, please refer to the Rate Card Management article.

The expense type associated to a resource's rate card must also be set as capitalizable for resource forecasts and actuals to be included in capitalization calculations.

To configure expense types:

1. Navigate to Financial Administration > Expense Types.

2. Set the Capitalization Percentage to a value greater than 0%.

   • For forecasts: This setting determines whether the role-based cost allocation is eligible for capitalization. We will see in the next sections that the capitalization percentage for resource forecasts is determined by the capitalization profile.

   • For actuals: This setting applies only if the role and task are capitalizable. Capitalization percentage will be determined by % value set at expense type level.

Note: Amortization feature supported only when using Comprehensive Capitalization Model. Amortization trigger and Amortization Period (month) fields can be left as is with default settings.

The Capitalization Profile determines how resource roles are capitalized. This ensures that when resources are allocated to projects, their roles are assessed to determine whether their time is capitalizable and to what extent.

When assigning a resource to a project, a role must be selected. That role may be partially or fully capitalizable. The capitalization profile defines these rules by specifying the capitalization percentage for each role within given methodology.

To configure capitalization profiles:

1. Navigate to the Financial Administration page.

2. Download the Capitalization Profile template.

3. Populate the template with:

   • Profile Name – Identifies the profile with a unique name. This helps group capitalization rules logically.

   • Methodology – Defines the methodology for which the role can be capitalized.

   • Role – Specifies the resource role (e.g., Developer, Business Analyst).

   • Phase – Phase field is not considered in this model, but it cannot be blank.

   • Capitalization Percentage – Specifies how much of the role’s time is capitalizable. Instead of a simple binary classification (capitalizable or not), capitalization percentages allow for nuanced rules. For instance, a Developer’s time might be 60% capitalizable, whereas a Solution Architect’s time in the same phase might be 70%. These percentages ensure that capitalization aligns with financial policies and accurately reflects the nature of work performed.

4. Upload the completed file to apply the capitalization profile.

In the above example:

• Business Owners are not capitalized in Waterfall Methodology.

• Developers in Waterfall project are fully capitalized (100%).

• Business Analysts in Waterfall project are capitalized at 50% (50%).

Before using the Capitalization Profile upload feed, ensure that all roles listed in the file have been created in the Metadata Management page within the Administration Console.

Each project must be explicitly marked as eligible for capitalization for any resource costs to be capitalized.

The following project settings can be configured via the Project Details page or using the Project Details bulk edit functionality:

• Methodology

  • Assign the project methodology to ensure capitalization rules align with the project's structure and lifecycle.

• Implementation Date or End Date (depending on configuration)

  • Set the Implementation Date/End date to determine when capitalization ends.

• Capitalization Eligibility

  • Enable the Is Eligible to Capitalize Costs flag (‘Yes’) if the project qualifies for capitalization.

• Capitalization Profile

  • Assign the relevant Capitalization Profile to define the capitalization percentage for resource roles based on project methodology. Note that the capitalization profile is only required if your organization is tracking resource forecasts capitalization. 

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

• The project is eligible for capitalization – The project must be configured correctly, including an implementation date or end date (depending on configuration), capitalization eligibility enabled and an assigned capitalization profile as outlined in the Project Configuration section.

• The project has an assigned methodology – The project must have a methodology applied.

• The resource’s role is set as capitalizable – The role assigned to the resource must have a capitalization percentage greater than 0% in the capitalization profile.

• The rate card and expense type are capitalizable – The resource’s rate card must be set as capitalizable, and the expense type associated with it must have a capitalization percentage greater than 0%.

• The allocation falls within the valid period for capitalization– The forecast must be within the correct financial timeframe:

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

  • Before the Project Implementation Date or End Date ( depending 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.

If all the above conditions are met, the system calculates the capitalization amount based on the capitalization percentage defined in the Capitalization Profile for the resource’s role . This percentage determines the portion of the resource’s forecasted cost that is allocated as CapEx rather than OpEx.

A resource actual (timesheet entry) will be capitalized only if all the following conditions are met:

• The project is eligible for capitalization – The project must be configured correctly, including an implementation date or end date (depending on configuration), capitalization eligibility enabled and an assigned capitalization profile as outlined in the Project Configuration section.

• The timesheet entry falls within a project start date and implementation date or a project start date and end date(depending on configuration) – The period of the timesheet entry must align within project start/implementation dates or start/end dates to be capitalizable.

• The resource’s rate card and expense type are capitalizable – The rate card assigned to the resource must be set as capitalizable, and the expense type associated with it must have a capitalization percentage greater than 0%.

• The financial date of the actual must be within the valid period for capitalization–

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

  • Before the Project Implementation Date or End Date ( depending on configuration) – Actuals posted after this date are considered operational costs.

  • 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.

If all the above conditions are met, the system calculates the capitalization amount based on the capitalization percentage set in the expense type of the resource’s rate card. This percentage determines the portion of the resource’s actual cost (based on timesheet entries) that is classified as CapEx rather than OpEx.