One-off training run
A large training run provisioned as a project can be capitalized as internal-use software development, but only once funding is committed and the probable-to-complete threshold is met, which under ASU 2025-06 (required for annual periods beginning after 15 December 2027, adoptable earlier) also means no significant development uncertainty remains ASU 2025-06. Before adoption, the run must also sit in the application-development stage ASC 350-40-25. A novel or exploratory run whose feasibility is unproven is research, expensed as incurred, even with the budget fully committed.
The gate before capitalization
The compute for a training run is large and lands before you know the model works, which is exactly the situation ASU 2025-06 addresses. Capitalization requires both that management has committed funding and it is probable the project completes and the software is used, and that no significant uncertainty remains about producing usable software ASU 2025-06.
Capitalize, expense or COGS
- Development of a buyer-owned internal model, gate cleared: capitalize ASC 350-40-25.
- Exploratory or novel run, feasibility unproven: expense as research ASU 2025-06.
- Retraining to sustain a live paid product: cost of revenue.
Questions this posts answers
- Can we capitalize LLM training costs?
- Yes, when the run develops a buyer-owned internal model, funding is committed and completion is probable; after adopting ASU 2025-06, no significant development uncertainty may remain. Exploratory or novel runs are expensed as research.
Posts to
Primary sources
- [S3] BDO: New ASU on internal-use software costs guidance (ASU 2025-06) (US GAAP)
- [S7] FASB: ASU 2025-06, Intangibles, Goodwill and Other, Internal-Use Software (Subtopic 350-40): Targeted Improvements (issued September 2025; reproduces the amended ASC 350-40 text) (US GAAP)
Ledger current as of 2026-10-23. A position and a citation, not accounting advice. See how we cite.