Can you capitalize AI coding tool costs?

Under US GAAP, some AI coding-tool costs may be capitalized as software development costs, but only when they are external services directly attributable to qualifying development activities on specific projects during the capitalization period. Deloitte and EY guidance emphasizes that billing models, such as token-based charges or fixed subscriptions, do not determine treatment on their own; broadly available subscriptions are generally expensed, while project-specific subscriptions or traceable usage for coding, testing, approved functionality, and pre-release defect correction may qualify. Companies need reliable evidence linking AI consumption to projects and activities, often through token logs, development tickets, repositories, and pull requests, while mixed agent sessions must be separated between qualifying and nonqualifying work. Broad allocations based on headcount or engineering labor are generally insufficient, although systematic allocations may be acceptable when they closely reflect identifiable direct AI development use and are supported by controls. Prepaid credits, minimum commitments, human developer labor, and AI service costs require separate analysis, while ASU 2025-06 will change the timing of capitalization beginning in 2028 without changing eligible cost types. Under IFRS, AI access is typically treated as a service, though qualifying development costs may still be included in an internally developed intangible asset if recognition criteria are met.

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