# 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](/software-capitalization/glossary/asc-985-20) | mostly **expensed** until technological feasibility — little is capitalized in practice |
| Internal tooling or integrations for your **own operations** | [ASC 350-40](/software-capitalization/glossary/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](/software-capitalization/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](/software-capex) 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.

[Talk to us about capex](https://www.quantifyhq.com/contact?utm_campaign=capex)