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.

When setting up non-resource cost capitalisation, it is important to consider:

• Eligibility Criteria – Determining which projects and expense types qualify for capitalisation based on financial policies and accounting rules.

• Amortisation Rules – Establishing when capitalised costs transition from capitalisation to expense recognition and the duration over which costs are amortised.

• System Configuration – Ensuring correct setup of expense types, project properties, and financial periods to support automated capitalisation calculations.

This article provides instructions for setting up capitalisation for 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 and ensure compliance with financial policies. 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

Setting up the project correctly is essential for ensuring that non-resource costs are capitalised in alignment with financial policies. Proper configuration enables the system to distinguish which projects are eligible for capitalisation and ensures that capitalisation amounts are correctly generated for eligible forecasts and actuals, allowing for accurate financial reporting and alignment with capitalisation policies. 

The following values can be set up by navigating to the Project Details page or by using 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.

Capitalisation Process 

The system calculates capitalisation for non-resource costs during nightly processing. However, when working on a project forecast or reviewing actuals, you may need to see the updated capitalisation amounts immediately rather than waiting for the nightly process. In such cases, the capitalisation forecast can be manually triggered from the Project Workspace. This ensures that project managers and PMOs have up-to-date visibility into capitalised amounts for both forecasts and actuals, supporting more informed decision-making and financial planning.

The system calculates capitalisation for non-resource costs based on specific conditions. Since a project may have multiple forecasts and actuals with different expense types, each record is assessed individually.

Capitalisation Process for Non-Resource Forecasts

Capitalisation will occur for a forecast record if the following conditions are met:

• The date of the forecast must be earlier than the project’s Implementation Date.
  
  

• The forecast must fall within an open financial period. Forecasts dated in locked periods will not be eligible for capitalisation processing.
  
  

• The expense type associated to the forecast must have a capitalisation percentage greater than 0%.

  • If the forecast was entered manually, the system uses the capitalisation percentage defined in the expense type.

  • If the forecast was uploaded via the Non-Resource Actuals and Forecasts bulk edit functionality, the system prioritises the capitalisation percentage and amortisation period specified in the upload file over the expense type settings.

Capitalisation Process for Actuals

Capitalisation will occur for an actual record if the following conditions are met:

• The actual cost must be incurred before the project’s Implementation Date.
  
  
• The actual cost must be recorded within a locked financial period to be eligible for capitalisation.
  
  
• The capitalisation percentage for the actual must be greater than 0%.
  • For non-resource actuals, the capitalisation percentage is determined at the point of actual cost entry via the Non-Resource Actuals & Forecast bulk edit file, which explicitly assigns a capitalisation percentage to each actual cost record. 
  • Manually entered actuals will not be capitalised. While the capitalisation percentage defined in the expense type serves as a guideline for forecasts, it is not used for actuals. Instead, the final capitalisation percentage is typically determined by the finance team, ensuring compliance with financial policies and contractual agreements. Since finance has ultimate authority over contract capitalisation, the bulk upload process is the mechanism for accurately applying capitalisation percentages to actual costs.
  • Please note if no capitalisation percentage is specified in the Non-Resource Actuals & Forecast bulk edit file, then the actuals is recorded as an opex record.