Definition
Commitment vs consumption
The posting
Commitment vs consumption is the distinction between committing to future compute capacity, which books as a prepaid asset or an executory contract, and consuming capacity, which books as expense, cost of revenue, or a capitalized asset in a build window ASU 2018-15. It decides whether an instrument hits the balance sheet or the P&L first.
Why it decides prepaid vs period cost
A commitment is a right to future service; nothing is consumed at signing, so it cannot be a period expense. Consumption is the drawdown of that right, and only then does a cost belong in the P&L or an asset. Collapsing the two into one expense is the most common posting error on committed compute.
Posts to
Primary sources
Ledger current as of 2026-07-24. A position and a citation, not accounting advice. See how we cite.