Capitalisation - Overview and Settings

Modified on Tue, 05 Apr 2022 at 09:33 PM


In this article we will look at how to populate and report Capitalisation costs using Fluid.

Capitalisation (known also as capex) is a key business driver. The correct application of capex to costs allows the organisation to optimise profits in any accounting period. There should always be strict audit controls in place to support capitalisation, and there is a need for any organisation to be consistent in how capex is applied and reported to ensure good corporate governance exists. This is often an area that is examined during financial audits, and so consistent clear processes and records are important to managing capitalisation.

With this is in mind, whilst this article will cover how Fluid supports capex, the rules on how capex is applied in your organisation will be with your finance organisation, and Fluid should always be used in conjunction with their guidance.

The following parameters need to be applied to reflect capex accurately in Fluid. As we have explored before, Fluid seperates Resource costs, as they are driven by time spent, and non-Resource costs, which relate to external expense. This logic is also applied to Capitalisation, and so the table below seeks to clarify how the is applied to capitalisation.

Background reading

This article assumes a working knowledge of cost management in Fluid for Resource and Non-Resource costs.

Further information can be found here:-

Metadata and Project configuration

The following table is a summary of the areas that need to be considered and set up to support Capex in Fluid.

There are further detailed instructions avaliable to take you through the details shown summarized in the below table, which can be found here:-

Points to note

Data Consistency

When populating data such as Task or Role names, make sure these are used consistently in the metadata. Also ensure any changes made during routine data maintenance are checked to ensure consistency here. For example, if a new role is added, ensure the Capitalization Profile is updated to reflect this.

Rate Card and Capex

Resources can be flagged as capitalisable, but will not flow through as Capex costs unless the tasks they work on are also flagged as capex within a specific project. Unless known that a rate card and associated resources will never work on capitalisable work, we would advise rate cards default to Capitalisable. 

Project Methodology vs Policy

Fluid uses Project methodology to determine the Capitalisation Profile. However, if the organisation has different Capex profiles and policies for different types of project work, we would suggest tagging the Project Methodology with the Capex Policy. 

For example, if the organisation has a policy to fully recognise New Client Set Up Projects as 100% Capex, because the expense is tied to future contract revenue, if this is as agreed with their audit and finance governance, we would recommend that the Project Methodology and Capex Polices are combined, for example, in the Methodology, this could be referred to as Waterfall - New Client - Policy 4.

This can been seen in the example below, where there are three different capex profiles in operation in this organisation, and as a result, Fluid can support the organisation to report against all three policies in place.

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