Effective capitalisation of non-resource costs is essential for ensuring accurate financial reporting, maintaining compliance with accounting standards, and maximising the value of capital investments. Capitalising non-resource costs — such as equipment purchases, software licences, or external consultancy fees — ensures that these expenses are allocated correctly over time rather than being fully expensed upfront. This approach aligns financial planning with project lifecycles, providing a more accurate representation of project costs and benefits.

To ensure accurate capitalisation of non-resource costs, you need to ensure the following:

• Expense Types Configuration – Expense types must be set as capitalisable, with a capitalisation percentage greater than 0%.
  
  

• Project Capitalisation Eligibility – The project must be set as eligible for capitalisation, meaning it has been explicitly marked as a capital investment rather than an operational expense, ensuring that costs associated with it can be capitalised in line with financial policies and accounting standards.

This article provides guidance on setting up expense types and configuring projects. It also explains capitalisation calculations for both non-resource cost forecasts and actuals.

System Configuration

Expense Type Setup

To enable accurate capitalisation of non-resource cost forecasts, it is essential to configure expense types correctly, as they determine which costs can be capitalised. The following steps outline how to set up expense types to ensure they are capitalised appropriately.

• Navigate to the Expense Types configuration page, accessible from the Financial Administration page.
  
  
• For each relevant expense type, set the Capitalisation Percentage to a value greater than 0%. This determines the portion of the expense eligible for capitalisation.
  
  
• If amortisation is enabled, configure the following settings (not required otherwise):
  • set the Amortisation Trigger as either ‘Immediate’ or ‘Implementation’, depending on when amortisation should begin.
  • Define the Amortisation Period to specify the number of months over which costs will be amortised.

Project Configuration

For a non-resource cost to be capitalised, the project it is posted to must be configured as eligible for capitalisation.

The following values can be set either from the Project Details page or through the Project Details bulk edit functionality:

1. Capitalisation Eligibility
   • Set the Is Eligible to Capitalise Costs flag to ‘Yes’ if the project is eligible for capitalisation.
     
     
2. Implementation Date
   • Set an Implementation Date to the project. This date is crucial for determining when capitalisation ends and, if applicable, when amortisation processes begin. If amortisation starts at implementation, this date marks the transition point between capitalisation and expense recognition.
     
     
3. Amortisation Period
   1. If amortisation is enabled, ensure the Amortisation Period is greater than 0 for the project to be eligible for capitalisation. This period dictates the duration over which capitalised costs are amortised. Otherwise, leave this value to 0.

Non-Resource Forecast Capitalisation Calculation

As outlined in The Capitalisation Process: How It Works article, the capitalisation process determines the capitalised amounts for financial records based on predefined rules.

Capitalisation Criteria for Forecast Records

A forecast record will be capitalised only if all the following conditions are met:

• The project is set as eligible for capitalisation.
  
  
• The financial date of the forecast falls:
  • After the Capitalisation Lock Date – Forecasts before this date are locked and cannot be capitalised.
  • Before the Project Implementation Date – Forecasts beyond this date are considered operational costs.
  • Within an open financial period – Forecasts in closed or locked periods will not be processed for capitalisation.
    
    
• The expense type linked to the forecast has a capitalisation percentage greater than 0%.

Capitalisation Calculation

If a forecast meets all the above conditions, capitalisation amounts are determined as follows:

• Manually Entered or Bulk-Edited Forecasts using the 'Financial Forecast Bulk Edit' functionality:

  • The system applies the capitalisation percentage defined in the expense type configuration.

• Forecasts Uploaded via 'Non-Resource Actuals and Forecasts' bulk edit:

  • The capitalisation percentage value provided in the upload file overrides the expense type settings, ensuring flexibility in financial adjustments.

Non-Resource Actuals Capitalisation Calculation

Capitalisation Criteria for Actual Records

An actual record will be capitalised only if all the following conditions are met:

• The project is set as eligible for capitalisation.
  
  
• The expense type linked to the actual record has a capitalisation percentage greater than 0%.
  
  
• The actual cost has been recorded using the Non-Resource Actuals & Forecast bulk edit file.
  • Manually entered actuals and actuals uploaded via the Financial Actuals Bulk Edit file are not eligible for capitalisation, as these records automatically default to a 0% capitalisation percentage. The capitalisation percentage for actuals is indeed determined explicitly at the point of entry via the Non-Resource Actuals & Forecast bulk edit file, ensuring compliance with financial policies and contractual agreements.
    
    

• The financial date of the actual must be:
  • After the Capitalisation Lock Date – Actuals posted before this date are locked and cannot be capitalised.
  • Before the Project Implementation Date – Actuals posted after this date are considered operational costs.
  • Within a locked financial period – Only actuals posted in a closed financial month will be capitalised. If the period is still open, the actuals will not be processed for capitalisation.

Capitalisation Calculation

If an actual meets all the above conditions, the capitalisation amount is determined as follows:

• The capitalisation percentage used to calculate the capitalisation amount is the percentage specified at the time the record was uploaded.
  
  

• If no capitalisation percentage is provided in the upload file, the actual record is automatically classified as OpEx and will not be capitalised.