Capex and opex separate spending that creates an asset, which reaches the profit and loss account as depreciation or amortisation over its useful life, from spending that is an expense of the period in which it is incurred. Cloud consumption usually falls on the second side: compute, storage and SaaS use resources the provider runs, and for SaaS the IFRS Interpretations Committee concluded in 2019 that a contract conveying only the right to access the supplier's software is a service contract. Capitalisation questions arise in three places: when cloud cost goes into software you develop yourself, when a cloud solution is configured or customised, and when future usage is paid in advance. Whether anything is capitalised is for you to decide with your auditor and tax adviser (in Germany, the Wirtschaftsprüfer and Steuerberater).
How it works
The difference is one of timing, not of total. An expense reduces the result of the period in which the service is received. A capitalised amount first sits on the balance sheet and, where its useful life is limited, is written off on a schedule: § 253(3) of the German Commercial Code (HGB) requires a plan that spreads the cost over the financial years in which the asset is expected to be used, and prescribes ten years where the useful life of an internally generated intangible asset exceptionally cannot be estimated reliably. Under IAS 38 an intangible asset with a finite useful life is amortised as well (paragraph 97). Capitalising does not change the cloud invoice, only how its lines are booked.
Which question a framework asks depends on what the cloud cost is for:
| Situation | What the framework asks | Reference |
|---|---|---|
| Running production, internal tools, ongoing data processing | Is an asset of your own created, or is a service of the period consumed? | IAS 38; for SaaS the 2019 agenda decision |
| Development, test and CI environments for your own software | Is the usage in the development phase, directly attributable to the project and separated from research? | HGB § 248(2) and § 255(2), (2a); IAS 38 paragraphs 54, 57 and 65 to 67 |
| Configuring or customising a SaaS application | Does a resource under your own control arise, such as additional code? If not, when is the service performed? | 2021 agenda decision |
| Prepayment, such as an All Upfront reservation | Is the payment an expense for a specific period after the balance sheet date? | HGB § 250(1); for SaaS the 2019 agenda decision on prepayments |
HGB
§ 248(2) HGB allows internally generated intangible fixed assets to be recognised; it is an option, not an obligation. Under § 255(2a) their cost is the expenditure incurred in development within the meaning of subsection 2, and subsection 2 counts the consumption of goods and the use of services among it. Research is excluded, and where research and development cannot be reliably distinguished, capitalisation is ruled out. For the tax balance sheet, § 5(2) of the Income Tax Act (EStG) recognises intangible fixed assets only if they were acquired for consideration. Commercial and tax accounts can therefore diverge here.
IFRS
For development, IAS 38 offers no option. Research expenditure is an expense when incurred (paragraph 54). An asset arising from development is recognised if, and only if, the entity can demonstrate all six criteria in paragraph 57. Its cost comprises directly attributable costs, explicitly including services consumed in generating the asset (paragraph 66), but not general overheads unless directly attributable, identified inefficiencies or staff training (paragraph 67). Cost is counted from the date the criteria are first met; expenditure already recognised as an expense is not reinstated (paragraphs 65 and 71).
On cloud software the IFRS Interpretations Committee has published two agenda decisions. The March 2019 decision states that a contract conveying only the right to receive future access to the supplier's application is a service contract; if the customer pays in advance, the prepayment is an asset. The decision on configuration and customisation costs, published in April 2021, observes that the customer often recognises no intangible asset because it does not control the software. Additional code whose benefits the customer controls can be different. Otherwise the service is an expense when performed. If the software's supplier performs it, that is when it configures the software where the service is distinct, and over the contract term where it is not; if a third party performs it, that is when the third party configures the software. Both decisions concern SaaS. Whether their reasoning carries over to infrastructure and platform services is for your auditor to judge.
What it means for your cost
Capitalising changes where cloud cost sits in the accounts, not what a cost report shows. Budgets and forecasts still run on monthly usage. Where the remaining cost appears in the income statement, and what that does to margin, is covered in cloud cost in the P&L, COGS and gross margin. UK accounts under FRS 102 follow their own rules, which the article linked below covers.
A common confusion hangs on the word amortised. Amortized cost in billing data spreads a prepayment for a reservation or a Savings Plan over its term (list, billed, effective and amortized cost). That is a reporting view, not capitalisation. AWS charges an All Upfront reservation immediately; how the accountant records that payment is decided with the tax adviser.
Where capitalisation is in question, it needs more from the billing data than a monthly total:
- Cost per project and environment (development, test, production, experiments), most robustly through separate accounts, subscriptions or projects (allocation by account, subscription and project).
- A time resolution that catches the start and end of the development phase.
- Shared items such as clusters, networking or logging with their documented key (shared cost and how to split it), and the unallocated remainder as an item of its own.
- The data version of each month, so a capitalised amount can be traced later.
The evidence engineering keeps and the questions for the adviser are in Capitalise cloud costs? HGB, IFRS and adviser questions. Developers' staff costs belong to the same assessment but do not come from cloud data.
Where it goes wrong
- Whole invoice capitalised. Symptom: the capitalised amount equals a month's cloud invoice. Cause: the invoice mixes operations, experiments and development; only the share directly attributable to a project in development is in question.
- Phase started retroactively. Symptom: earlier months are to be capitalised after the fact. Cause: under IAS 38 cost counts only from the date the criteria are met, and expenditure already expensed is not reinstated.
- Research in the project environment. Symptom: experiments with an open outcome run in the same account as development. Cause: research is an expense, and where it is not reliably separated from development, § 255(2a) HGB rules capitalisation out.
- Amortised confused with capitalised. Symptom: the prepayment for a reservation appears in the capital expenditure plan. Cause: the amortised view spreads the payment over the term in a report, which decides nothing about capitalisation or deferral.
- SaaS set-up capitalised as software. Symptom: set-up costs of a SaaS tool appear as an intangible asset in IFRS accounts. Cause: under the 2021 agenda decision the customer usually does not control the software; only additional code under its own control is in question.
Sources
Read on 2026-10-16. IFRS Foundation IAS 38 Intangible Assets, agenda decision Customer's right to receive access to the supplier's software hosted on the cloud, March 2019, agenda decision Configuration or customisation costs in a cloud computing arrangement and IFRIC Update March 2021 with its April 2021 addendum; EUR-Lex IAS 38 in the consolidated text of Regulation (EU) 2023/1803; Gesetze im Internet § 248 HGB, § 250 HGB, § 253 HGB, § 255 HGB and § 5 EStG; AWS Understanding your bill.