Accurately capitalising resource costs is essential for ensuring that project labour expenses are correctly allocated as capital expenditure (CapEx) rather than operational expenditure (OpEx). Unlike non-resource costs, resource cost capitalisation is tied to the way people’s time and effort are allocated to projects. This process ensures compliance with accounting standards, supports financial planning, and provides a clearer view of investment in project development.

Before configuring resource capitalisation, it’s important to understand the key differences between capitalising resource forecasts and resource actuals:

• Resource Forecast Capitalisation – Based on the role assigned to a resource when they are allocated to a project. The forecasted allocation for that role is capitalised only if:

  • The role is set as capitalisable.
  • The allocation falls within a capitalisable project phase.
  • The project and financial setup allow for capitalisation.
  • The capitalisation profile defines how much of the role’s time is capitalised.
    
    

• Resource Actuals Capitalisation – Based on timesheet entries, meaning capitalisation is driven by what work was done rather than just the assigned role. A timesheet entry will be capitalised only if:

  • The task booked in the timesheet is marked as capitalisable.
  • The timesheet falls within a capitalisable project phase.
  • The project and financial setup allow for capitalisation.
  • The capitalisation percentage of expense type associated to the resource rate card defines >how much of the time booked is capitalised.

This article provides step-by-step guidance on configuring resource forecast and actuals capitalisation, outlining the necessary system settings, how to define capitalisable roles and tasks, and how capitalisation amounts are calculated to ensure accurate financial reporting and compliance with capitalisation policies.

System configuration

Step 1: Required Settings for both Resource Forecast and Resource Actuals Capitalisation

Before setting up capitalisation calculations, the following configurations must be in place for both resource forecasts and resource actuals capitalisation.

Methodologies and Phases

Project methodologies and phases define when and how resource costs are capitalised. Capitalisation is not applied uniformly across all project activities — it depends on the current project phase and the tasks performed within that phase.

• For resource forecasts: A role is only capitalised if the project is in a phase where that role has been marked as capitalisable in the capitalisation profile.
  
  
• For resource actuals: A timesheet entry will only be capitalised if it is booked against a capitalisable task within the current project phase.

If the project's methodologies and phases are not configured correctly:

• Forecasted resource allocations may not be capitalised even if the role is eligible.
• Timesheet entries may not be recognised as capitalisable, impacting financial reporting.

Methodologies and phases can be configured from the Methodologies, Phases, and Tasks settings page. Please refer to this article to learn more.

Resource Rate Cards

Each resource is assigned a rate card that defines their financial rates — hourly, daily, or monthly — based on their role, skills, or services.

To ensure accurate capitalisation of resource costs, the rate card assigned to a resource must be set as capitalisable if their work is expected to contribute to capital expenditure. Since rate cards define the cost of a resource based on factors such as role, location, seniority, or contract type, not all rate cards should be capitalised. Typically, only rate cards used for resources performing capitalisable work — such as those engaged in development, implementation, or asset creation — should be set as capitalisable. Rate cards associated with operational functions, overhead roles, or non-capitalisable activities should remain non-capitalisable to ensure accurate financial reporting.

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

Expense Types

The expense type associated to a resource's rate card must also be set as capitalisable for resource forecasts and actuals to be included in capitalisation calculations.

To configure expense types:

1. Navigate to Financial Administration > Expense Types.
   
   
2. Set the Capitalisation Percentage to a value greater than 0%.
   • For forecasts: This setting determines whether the role-based cost allocation is eligible for capitalisation. We will see in the next sections that the capitalisation percentage for resource forecasts is determined by the capitalisation profile.
     
     
   • For actuals: This setting applies only if the role and task are capitalisable.

If amortisation is enabled, configure the following (not required otherwise):

• Amortisation Trigger – Set as ‘Immediate’ or ‘Implementation’ based on when amortisation should begin.
• Amortisation Period – Defines the number of months over which capitalised costs are amortised.

Step 2: Configure Capitalisation Profiles for Resource Forecast Capitalisation

The Capitalisation Profile determines how resource roles are capitalised within different project phases. 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 configure capitalisation profiles:

1. Navigate to the Financial Administration page.
2. Download the Capitalisation Profile template.
3. Populate the template with:
   • Profile Name – Identifies the profile with a unique name. This helps group capitalisation rules logically.
   • Methodology – Defines the methodology for which the role can be capitalised.
   • Role – Specifies the resource role (e.g., Developer, Business Analyst).
   • Phase – Defines in which phase the role is capitalisable.
   • Capitalisation Percentage – Specifies how much of the role’s time 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.
4. Upload the completed file to apply the capitalisation profile.

In the above 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.

Step 3: Configure Capitalisable Tasks for Resource Actuals Capitalisation

For actuals to be capitalised, the tasks (activities) logged in timesheets must be set as capitalisable.

To configure capitalisable tasks:

1. Navigate to Administration Console > Project Settings > Methodologies, Phases & Tasks.
2. Under Tasks, set relevant tasks as capitalisable for the appropriate project phase.

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

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 read more about project activities here.

Project Configuration

Each project must be explicitly marked as eligible for capitalisation for any resource costs to be capitalised.

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. Note that the capitalisation profile is only required if your organisation is tracking resource forecasts capitalisation. 

• 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.

Resource Forecast Capitalisation Calculation

Capitalisation Criteria for Resource Forecasts

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

• The project is eligible for capitalisation – The project must be configured correctly, including an implementation date, capitalisation eligibility enabled, an assigned capitalisation profile, and properly defined project dates, as outlined in the Project Configuration section.
  
  
• The project has an assigned methodology – The project must have a methodology applied, as capitalisation is determined based on project phases.
  
  
• The month of the allocation falls within a capitalisable phase – The forecasted allocation must fall within a project phase where the assigned role is capitalisable, according to the capitalisation profile.
  
  
• The resource’s role is set as capitalisable – The role assigned to the resource must have a capitalisation percentage greater than 0% in the capitalisation profile for the relevant project phase.
  
  
• The rate card and expense type are capitalisable – The resource’s rate card must be set as capitalisable, and the expense type associated with it must have a capitalisation percentage greater than 0%.
  
  
• The allocation falls within the valid period for capitalisation– The forecast must be within the correct financial timeframe:
  • 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.

Capitalisation Calculation

If all the above conditions are met, the system calculates the capitalisation amount based on the capitalisation percentage defined in the Capitalisation Profile for the resource’s role within the current project phase. This percentage determines the portion of the resource’s forecasted cost that is allocated as CapEx rather than OpEx.

Resource Actuals Capitalisation Calculation

Capitalisation Criteria for Resource Actuals

A resource actual (timesheet entry) will be capitalised only if all the following conditions are met:

• The project is eligible for capitalisation – The project must be configured correctly, including an implementation date, capitalisation eligibility enabled, and properly defined project dates, as outlined in the Project Configuration section.
  
  
• The project has an assigned methodology – The project must have a methodology applied, as capitalisation is determined based on project phases.
  
  
• The timesheet entry falls within a capitalisable phase – The period of the timesheet entry must align with a project phase where the task booked in the timesheet is set as capitalisable.
  
  

• The timesheet task is capitalisable in the relevant phase – The task selected in the timesheet must be set as capitalisable for the project phase corresponding to the timesheet entry period in the Methodologies, Phases & Tasks configuration. 

• The resource’s rate card and expense type are capitalisable – The rate card assigned to the resource must be set as capitalisable, and the expense type associated with it must have a capitalisation percentage greater than 0%.
  
  
• The financial date of the actual must be within the valid period for capitalisation–
  • 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 all the above conditions are met, the system calculates the capitalisation amount based on the capitalisation percentage set in the expense type of the resource’s rate card. This percentage determines the portion of the resource’s actual cost (based on timesheet entries) that is classified as CapEx rather than OpEx.