Treatments
The CFO entry point. Every spend instrument resolves to one of these ledger lines. Start here when the question is what a spend item does to operating margin, the balance sheet or gross margin.
The seven ledger lines
- Capitalize
Capitalize: token and compute spend as an asset
Capitalizing token or compute spend means recording it as a software asset on the balance sheet rather than an expense in the period. Under US GAAP only directl...
- Expense
Expense: token spend as a period cost
Most token spend is expensed as incurred because it is consumption, not asset creation. Production inference, experimentation, rented model access and post-impl...
- Prepaid asset
Prepaid asset: committed but unconsumed compute
A prepaid asset is committed compute or credits you have paid for but not yet consumed. It sits on the balance sheet as prepaid compute and unwinds to the P&L, ...
- Cost of revenue
Cost of revenue: inference that delivers a paid product
When production inference is a direct input to a product a customer pays for, it belongs in cost of revenue, not operating expense. The cash cost is identical, ...
- Split
Split: allocating one commitment across lines
A split posting allocates one spend item across capitalize, prepaid and expense because a single commitment funds more than one activity. A reserved commitment ...
- Capitalize
Amortization and useful life for a model that ages fast
A capitalized AI asset needs a finite useful life and an amortization method. For a model likely obsolete within 18 to 24 months, that short life must be reflec...
- Expense
Impairment and obsolescence of a capitalized model
A capitalized model or training run that is superseded before the end of its useful life must be tested for impairment and written down when its carrying amount...