Capitalized Expense
A cost that is recorded as a long-lived asset on the balance sheet and amortized over multiple years rather than expensed immediately on the income statement. Common examples include capitalized software development, capitalized cloud-infrastructure costs, and capitalized customer-acquisition costs. The accounting treatment is legitimate when the cost produces a future economic benefit beyond the current period, but the threshold for what qualifies leaves significant management judgment. A change in capitalization policy that lowers the threshold (more costs moved off the income statement and onto the balance sheet) inflates near-term operating income at the cost of higher amortization in later years; the diagnostic is to read the accounting-policies footnote for any change in capitalization criteria or useful-life assumption.
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Related terms
Accounts Payable · Adjusted EBITDA · Adjusted EBITDA Ex-SBC · ADR · ARPU · Average Length Of Stay
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