Standards-anchored to primary IFRS and FASB text. Worked figures are illustrative. Not accounting advice.
TCTokenCapitalisation
Standard, US GAAP

ASC 350-40 Internal-Use Software

Standard
ASC 350-40 is the US GAAP standard for internal-use software. It determines which development costs are capitalised and which are expensed ASC 350-40. Historically it did so across preliminary, application-development and post-implementation stages; ASU 2025-06 has replaced those bright lines with a probable-to-complete threshold ASU 2025-06.

What it covers

ASC 350-40 applies to software developed or obtained for internal use, which captures most internally built AI systems that a company runs for its own operations rather than sells. It sets out which costs incurred in developing that software are capitalised as an asset and which are expensed as incurred ASC 350-40.

The historical stage model

Under the long-standing model, costs in the preliminary project stage were expensed, costs in the application-development stage were capitalised once the preliminary stage was complete and management had committed to the project, and post-implementation costs were expensed. The stage a cost fell into determined its treatment.

How it differs from IAS 38

IAS 38 and ASC 350-40 reach broadly similar outcomes but by different routes. IAS 38 uses the research-versus-development test and six recognition conditions IAS 38 §54-62; ASC 350-40 used project stages and now uses the probable-to-complete threshold. The clearest practical divergence is on the exact point at which capitalisation begins, which matters for pinning the phase boundary in the token ledger.

How ASU 2025-06 amends it

ASU 2025-06 removes the project-stage bright lines and begins capitalisation once management has authorised the project and it is probable the project will be completed and the software used as intended ASU 2025-06. This suits iterative AI development, which did not map cleanly onto discrete stages.