**2026-06-20**

# What ASU 2025-06 Means for Auditors

[ASU 2025-06](/software-capitalization/asu-2025-06) replaces a bright-line stage test with a principles-based threshold — and that shifts work onto auditors. Instead of checking which stage a cost fell in, you're now evaluating management's judgment about whether a project was funded, probable to complete, and free of significant development uncertainty.

## The judgment challenge

The profession has already flagged this. Moving from rigid stages to a probability-based approach is a positive step, but auditors face a real challenge evaluating management's judgment calls — interpreting and auditing the probability threshold, as commentators have noted, will require significant effort.

## What you'll be testing

The capitalization start date now rests on three judgments, each with evidence to test:

- **Funding committed** — management or board authorization, approved budgets, signed contracts, with dates.
- **Requirements stabilized** — that the significant [performance requirements](/software-capitalization/glossary/performance-requirements) were identified and not substantially revised afterward.
- **Significant development uncertainty resolved** — that novel or unproven technology was actually resolved through coding and testing, not merely asserted.

The strongest evidence is contemporaneous and lives in the company's delivery tooling — funding decisions, scope-stabilization points, spike resolutions — captured as they happened, not reconstructed at year-end.

## Watch the soft spots

- The **"software project" unit of account** is undefined, a likely source of diversity in practice and inconsistent application.
- **AI development and training-data costs** are genuinely unsettled, with the major firms diverging — scrutinize the policy and its consistency. (See [AI development costs](/software-capitalization/ai-development-costs).)
- **Transition** — the modified method's derecognition of in-process costs is easy to miss.

## Where the evidence comes from

Clients that capture the funding, scope, and risk-resolution signals in their issue tracker give you an auditable trail by construction. [Quantify](/software-capitalization/applying-asu-2025-06) ties capitalization to dated, traceable work items — as useful to the auditor as to the preparer.

## Frequently asked questions

### What's the biggest audit change under ASU 2025-06?

Evaluating management's judgment on the probable-to-complete threshold, rather than checking which project stage a cost fell in.

### What evidence supports the capitalization date?

Contemporaneous records of when funding was committed, when significant requirements stabilized, and when significant development uncertainty was resolved through coding and testing.

### Where are the diversity-in-practice risks?

The undefined "software project" unit of account, and the unsettled treatment of AI development and training-data costs.

## See your team's delivery, clearly

Quantify turns Jira into delivery metrics, flow insights, and audit-ready software-capitalization data — automatically.

[Book a Demo](https://www.calendly.com/quantify)