SplitVector DB and retrieval
Vector DB and retrieval (RAG)
The posting
RAG infrastructure splits between build and run. Building the retrieval pipeline and the initial embedding index in the development window is capitalizable internal-use software ASC 350-40-25. Recurring re-embedding, query-time compute and index maintenance are run costs, expensed as incurred. Allocate a mixed spend to the two on a defensible, documented basis.
Build capitalizes, run expenses
- Designing and coding the retrieval pipeline, chunking and initial index build: capitalize.
- Ongoing re-embedding of changed content and query-time inference: expense, or cost of revenue for a paid product.
- Vector store subscription: a service contract, expensed ASU 2018-15.
Illustrative build vs run split40 - 60%
CapitalizeExpense
Posts to
Primary sources
- [S1] KPMG: Hot Topic: Accounting for internal-use software (ASC 350-40) (US GAAP)
- [S4] Weaver: Navigating internally developed software costs: U.S. GAAP vs tax treatment (US GAAP)
Ledger current as of 2026-07-24. A position and a citation, not accounting advice. See how we cite.