**2026-06-20**

# What ASU 2025-06 Means for SaaS Companies

SaaS companies are the group [ASU 2025-06](/software-capitalization/asu-2025-06) affects most. Because hosted software you build to deliver a service is internal-use software under [ASC 350-40](/software-capitalization/glossary/asc-350-40), the standard applies squarely to your core product development — and it changes when, and how much, you capitalize.

## Expect more early expensing

The new [probable-to-complete threshold](/software-capitalization/glossary/probable-to-complete) is gated by [significant development uncertainty](/software-capitalization/glossary/significant-development-uncertainty): you can't capitalize while a feature's technology is unproven or its requirements are still churning. New SaaS features live in exactly that zone early on. FASB expects capitalization to **decrease** for cloud and SaaS development, bringing it closer to how externally-sold software is treated. Exploratory work you might have capitalized under the old "application development stage" may now be expensed until the feature is funded, scoped, and de-risked.

## Define your unit of account

The standard deliberately doesn't define the "software project" — it could be a product, a module, or a major feature. That judgment is yours, and it shapes everything: too broad a unit hides uncertain sub-projects inside a probable one; too narrow creates overhead. Pick a level — often the epic or initiative — and apply it consistently.

## The documentation bar rises

Trading rigid stages for judgment means you need a contemporaneous record of three things: when funding was committed, when the significant [performance requirements](/software-capitalization/glossary/performance-requirements) stabilized, and when novel technology was resolved through coding and testing. That evidence lives in your product and engineering tooling, not your ledger — see [applying ASU 2025-06](/software-capitalization/applying-asu-2025-06) for the backlog mapping.

## Finance and engineering have to talk

None of this works if finance writes the policy in a vacuum. Engineering knows when a spike resolved the risk and when scope settled; finance owns the schedule. The teams that adopt smoothly build one repeatable, evidence-based process — and [Quantify](/software-capex) supplies the evidence from the issue tracker, with no manual timesheets.

## Frequently asked questions

### Does ASU 2025-06 mean SaaS companies capitalize less?

Often, yes — especially for novel features. FASB expects capitalization to decrease for cloud and SaaS development under the new threshold.

### When does it take effect?

Fiscal years beginning after December 15, 2027 (FY2028 for calendar-year companies), with early adoption permitted now.

### What's the "software project" for a SaaS company?

The standard leaves it to judgment — commonly an epic, module, or major feature. Choose a level and apply it consistently.

## 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)