ExpenseExpense
Expense: token spend as a period cost
The posting
Most token spend is expensed as incurred because it is consumption, not asset creation. Production inference, experimentation, rented model access and post-implementation maintenance all hit the P&L in the period ASC 350-40-35. Expensing is the default; capitalization is the exception that must be earned by meeting a recognition test.
What is mandatory expense
- Preliminary-stage evaluation and vendor selection ASC 350-40-25.
- Post-implementation operation, maintenance and running the model ASC 350-40-35.
- Rented model access you do not control, and experimentation with unproven feasibility.
Expense vs cost of revenue
Expensing routes to operating expense for internal use, but when the token spend is a direct input to a paid product it belongs in cost of revenue instead. Both are P&L, but the line choice changes reported gross margin and how investors read unit economics.
Instruments and mechanics that land here
Primary sources
- [S1] KPMG: Hot Topic: Accounting for internal-use software (ASC 350-40) (US GAAP)
- [S4] Weaver: Navigating internally developed software costs: U.S. GAAP vs tax treatment (US GAAP)
Ledger current as of 2026-07-24. A position and a citation, not accounting advice. See how we cite.