Capitalizing Software Costs for Apps Built on Platforms
Building apps on a platform? Whether you capitalize the development hinges on one question — are you building it to sell, or for your own use? That decides which accounting standard applies.
If you build apps or integrations on a platform — Atlassian, Salesforce, Shopify, ServiceNow — how you capitalize the development comes down to one question: are you building it to sell, or to run your own business? The answer puts you under a different accounting standard, with very different outcomes.
The deciding question: sell or use?
| You’re building… | Standard | Treatment |
|---|---|---|
| An app to sell, license, or market to others (e.g. a marketplace listing) | ASC 985-20 | mostly expensed until technological feasibility — little is capitalized in practice |
| Internal tooling or integrations for your own operations | ASC 350-40 | capitalize once funded and probable-to-complete |
| A hosted service customers access (they can’t take possession of the software) | ASC 350-40 | same as internal-use — expect less capitalization under ASU 2025-06 |
The line is purpose and delivery model, and whether the app conveys a software license to the customer. Selling an app on a marketplace is external-use software; building on a platform to power your own product or operations is internal-use.
Platform subscription and implementation costs
The ongoing fees for the platform you build on (the PaaS subscription) are expensed as incurred. Qualifying implementation and configuration costs for cloud arrangements follow ASC 350-40 (per ASU 2018-15) — capitalize the application-development-stage work, expense the rest.
What ASU 2025-06 changes
For the internal-use side, ASU 2025-06 replaces the old three-stage model with a probable-to-complete threshold gated by significant development uncertainty. Novel platform builds — new functionality, unproven integrations — may see more cost expensed early, until the work is funded, scoped, and de-risked. It does not change external-use software (ASC 985-20).
Tracking it
If your platform app is internal-use or a hosted service, the capitalizable work is the feature development your team does on it — separable from the discovery, configuration, and maintenance around it. Quantify derives that split from your issue tracker, so the capitalized amount traces back to the actual work.
Frequently asked questions
Is a marketplace app capitalized or expensed?
If you build it to sell or market, it’s external-use software (ASC 985-20) — mostly expensed until technological feasibility. If it’s internal tooling or a hosted service customers can’t take possession of, it’s internal-use software (ASC 350-40), and qualifying development is capitalized.
Are platform subscription fees capitalizable?
No — ongoing platform and subscription fees are expensed. Qualifying implementation and configuration costs for the cloud arrangement can be capitalized under ASC 350-40.
Does ASU 2025-06 affect apps built on platforms?
For the internal-use side (ASC 350-40), yes — it replaces the three-stage model with the probable-to-complete threshold. It doesn’t change external-use software (ASC 985-20).
Capitalize software development costs in Jira — without the manual work
Quantify turns Jira activity into audit-ready software-capitalization data automatically — no manual timesheets.