Capitalising resource costs is a critical process for ensuring accurate financial reporting, compliance with accounting standards, and proper allocation of expenses across project lifecycles. By capitalising resource costs appropriately, organisations can distinguish between capital expenditure (CapEx) and operational expenditure (OpEx), providing a clearer picture of project investments and financial performance.

Resource cost capitalisation is governed by several key factors, including project methodology, role-based capitalisation rules, expense type configurations, and rate card settings. 

This article provides a structured approach to configuring resource cost capitalisation within the system. It covers:

• System Configuration – Configuring methodologies, phases, tasks, capitalisation profiles, expense types, and rate card settings to define capitalisable activities.

• Project Configuration – Establishing capitalisation eligibility settings at the project level.

• Capitalisation Process – Understanding how capitalisation is applied to resource forecasts and timesheet actuals.

System Configuration

Methodology

Resource cost capitalisation is linked to the project's methodology and its current phase. Accurate financial reporting and compliance with accounting standards necessitate that only specific project activities, aligned with capitalisable tasks, are capitalised. Therefore, it's imperative to configure methodologies and phases correctly to ensure that capitalisation is applied appropriately.

Methodologies represent structured approaches combining practices, methods, and processes that guide project planning, development, management, and delivery throughout its lifecycle. Each methodology comprises distinct phases, outlining specific objectives, activities, and deliverables that must be completed before progressing to the next stage. Tasks associated with these phases represent the project activities to which resources can allocate time via timesheets. The capitalisation of these tasks depends on settings configured within the system.

To set up methodologies, phases, and tasks:

1. Access the Administration Console:

   • From the dropdown menu under your avatar, select Administration Console.

2. Navigate to Project Settings:

   • In the Project Settings section, select Methodologies, Phases, and Tasks.

3. Configure Methodologies, Phases, and Tasks:

   • On this page, you'll find sections for Methodologies, Phases, and Tasks:
     • Methodologies: Lists project methodologies that can be selected when creating a new project.
     • Phases: Represents the distinct stages of a project lifecycle associated with a selected methodology.
     • Tasks: Lists tasks that are capitalisable when the project is in a given phase. This list is required for the capitalisation of resource time actuals. If you are not using timesheets, you can leave this list empty.

When booking time against a project in a timesheet, selecting the appropriate task is crucial, as it specifies the type of work carried out. Whether or not the task incurs capitalisation depends on the task capitalisation setting configured in this section. If a task is marked as capitalisable, the percentage capitalisable amount will be derived from the expense type, provided that the resource rate card and the expense type have been set to capitalisable as well. This will be explained in more detailed below.

It's important to ensure that all tasks listed in this configuration align with the list of project activities set up in the application. You can review the project activities that have been configured by navigating to to the Project Type Management page from the Administration console (Project Sub Activities tab).

For detailed guidance on configuring methodologies, phases, and tasks, please refer to this article. 

Capitalisation Profile

The Capitalisation Profile upload feed is used to configure the capitalisation forecast profiles for resource expense categories. This ensures that when resources are allocated to projects, their roles are assessed based on project phases to determine whether their time is capitalisable and to what extent.

When assigning a resource to a project, a role must be selected. Depending on the phase the project is in, that role may be partially or fully capitalisable. The capitalisation profile defines these rules by specifying the capitalisation percentage for each role within a given project phase. This allows organisations to account for more complex capitalisation rules, where certain roles may have varying capitalisation percentages rather than a simple yes-or-no classification.

To set up Capitalisation Profiles, follow these steps:

1. Navigate to the Administration Console.
2. Download the Capitalisation Profile template.
3. Populate the template with the appropriate data for each project methodology and role.
4. Upload the completed file back into the system.

Understanding the Capitalisation Profile Template

The template consists of several key columns, each defining an important aspect of the capitalisation rules:

• ProfileName – A unique name for the capitalisation profile. This helps group capitalisation rules logically. 

• Methodology – The name of the project methodology for which the role can be capitalisable.

• Role – The resource role that is assigned within the project. This defines what function the resource is performing, such as Developer, Business Analyst, or Project Manager.

• Phase – The project phase during which the capitalisation rules apply. For example, in a Waterfall methodology, phases could include Initiation, Planning, Execution, and Closure. Each phase may have different capitalisation percentages based on the nature of work done in that stage.

• capitalisationPercentage – The percentage of the resource’s time that is capitalisable. Instead of a simple binary classification (capitalisable or not), capitalisation percentages allow for nuanced rules. For instance, a Developer’s time might be 60% capitalisable, whereas a Solution Architect’s time in the same phase might be 70%. These percentages ensure that capitalisation aligns with financial policies and accurately reflects the nature of work performed.

Example Capitalisation Profile Data

In this example:

• Business Analysts and Business Owners are not capitalised in the Execution phase.
• Developers working in the Execution phase of a Waterfall project are fully capitalised (100%).

Before using the Capitalisation Profile upload feed, ensure that all roles listed in the file have been created in the Metadata Management page within the Administration Console.

Expense Types

For capitalisation to occur, the expense type associated with a forecasted allocation cost or timesheet actual must be explicitly set as capitalisable. This ensures that only eligible expenses contribute to capitalised costs in financial reporting.

To configure expense types for capitalisation:

1. Navigate to the Expense Types configuration page, accessible from the Financial Administration page.
   
   
2. Set Capitalisation Percentage
   • For each relevant expense type, set the Capitalisation Percentage to a value greater than 0%.
   • This percentage determines what portion of the expense is eligible for capitalisation.
   • Note: For resource forecast capitalisation, the percentage set in the Capitalisation Profile will take precedence over the expense type percentage. However, the expense type must still be marked as capitalisable (i.e., greater than 0%) to ensure correct processing.
     
     
3. 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.

Rate card configuration

Each resource is associated with a rate card that defines their financial rates — such as hourly, daily, or monthly rates— based on their role, skills, or services within the organisation. 

To ensure accurate capitalisation of resource costs, it's essential that the rate card assigned to each resource is configured as capitalisable. This setting allows the system to appropriately capitalise eligible resource expenses during financial calculations.

For detailed guidance on managing rate cards, including setting them as capitalisable, please refer to the Rate Card Management article.

Project Configuration

Correctly configuring project settings is critical to ensuring that resource costs are capitalised in compliance with financial policies. This setup determines whether capitalisation applies to a project, and for how long.

The following project settings can be configured via the Project Details page or using the Project Details bulk edit functionality:

• Methodology

  • Assign the project methodology to ensure capitalisation rules align with the project's structure and lifecycle.

• Phase Dates

  • Set the start and end dates for each phase, defining the project timeline and ensuring accurate cost allocation.

• Implementation Date

  • Set the Implementation Date to determine when capitalisation ends and, if applicable, when amortisation begins.
  • If amortisation starts at implementation, this date marks the transition point between capitalisation and expense recognition.

• Capitalisation Eligibility

  • Enable the Is Eligible to Capitalise Costs flag (‘Yes’) if the project qualifies for capitalisation.

• Capitalisation Profile

  • Assign the relevant Capitalisation Profile to define the capitalisation percentage for resource roles based on project methodology and phase. The capitalisation profile is used to generate resource forecast capitalisation values.

• Amortisation Period

  • If amortisation is enabled, set the Amortisation Period to a value greater than 0 to specify the number of months over which capitalised costs will be amortised. If amortisation is not applicable, leave this value at 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.

Capitalisation process for resource forecast

Resource forecast capitalisation occurs only when all required conditions are met, ensuring compliance with financial policies and accurate cost allocation.

For a resource forecast to be capitalised, the following conditions must be satisfied:

1. The project must be correctly configured

   • The project must be set up as described in the Project Configuration section, including having the correct methodology, capitalisation eligibility, capitalisation profile and project dates.

2. The resource role must be capitalisable

   • The capitalisation profile feed must define a capitalisation percentage greater than 0% for the role within the current project phase.

3. The resource rate card must be capitalisable

   • The rate card associated with the resource must be set to capitalisable, ensuring that the system correctly applies capitalisation rules.

4. The resource expense type must be capitalisable

   • The expense type assigned to the resource must have a capitalisation percentage greater than 0%.
   • Important: The capitalisation percentage set for the role in the capitalisation profile feed takes precedence over the expense type percentage. However, the expense type must still be marked as capitalisable for capitalisation to be applied.

5. The resource allocation must fall within an open financial period

   • Capitalisation will only apply to resource allocation forecasts in an open month. If the financial period has been locked, the forecast will not be processed for capitalisation.

If all the above conditions are met, the system calculates the capitalisation amount based on the percentage defined in the Capitalisation Profile feed. This ensures that only the appropriate portion of resource costs is capitalised, maintaining financial accuracy and compliance.

Capitalisation process for resource actuals

Capitalisation of resource timesheets occurs when specific financial and project conditions are met, ensuring that time logged against capitalisable tasks is correctly accounted for.

For a timesheet actual to be capitalised, the following conditions must be met:

1. The project must be correctly configured

   • The project must be set up as described in the Project Configuration section, ensuring the correct methodology, capitalisation eligibility, and amortisation settings are applied.

2. The timesheet task must be capitalisable

   • The task selected in the timesheet must be marked as capitalisable for the current project phase.
   • This is configured in the Methodologies, Phases & Tasks upload feed to define which tasks can be capitalised at different project phases.

3. The resource rate card must be capitalisable

   • The rate card assigned to the resource must be set as capitalisable to ensure correct capitalisation calculations.

4. The resource expense type must be capitalisable

   • The expense type associated with the resource's  rate card must have a capitalisation percentage greater than 0%.

5. The financial period must be eligible for capitalisation

   • If the Show Actuals with Capex Split feature is turned off, capitalisation will only occur if the timesheet actuals are posted in a locked period.
   • If the Show Actuals with Capex Split feature is turned on, the timesheet actuals must be posted within the locked period + one additional month.
     • Example: If the locked period end date is August 2018, timesheet actuals for September 2018 will still be eligible for capitalisation, but not beyond October 2018.

If all conditions above are met, the capitalisation amount is calculated using the capitalisation percentage set in the expense type of the resource rate card.

The "Show Actuals with Capex Split" feature is used to determine whether capitalisation amounts for the current month’s actuals should be calculated and displayed in the Financials component of the workspace.