Capitalising development costs
Record hours and costs per development project, test the capitalisation criteria and calculate amortisation and the legal reserve of art. 2:365(2) DCC.
The short answer
Capitalising development costs means putting the costs of a development project on the balance sheet as an intangible fixed asset and amortising it over its useful life, instead of charging them directly to the result. That is only allowed if the project meets strict conditions, and whoever capitalises must maintain a legal reserve. The capitalisation module of Jaarrekening.io documents that assessment per project.
Legal framework
Legal framework (Dutch Civil Code): art. 2:365 DCCart. 2:386(3) DCCart. 2:388(2) DCCRJ 210
Costs of development are recognised separately under intangible fixed assets. If the entity capitalises them, it maintains a reserve equal to that amount, and medium-sized and large entities also explain them; micro and small are exempt from that explanation (art. 2:365 DCC). That legal reserve limits the room for distributions to shareholders.
Capitalised development costs are amortised over the expected useful life; if that cannot be estimated reliably, over at most ten years (art. 2:386(3) DCC). The valuation follows the production cost: direct costs and, if desired, a reasonable share of indirect costs and interest (art. 2:388(2) DCC).
The Dutch Accounting Standards (RJ 210) elaborate the conditions. Costs of research are never capitalised. Costs of development only if, among other things, technical feasibility is established, the company wants and is able to complete and use or sell the asset, the asset is likely to generate economic benefits and the costs can be measured reliably.
What the capitalisation module does
Projects
Per project the type of asset (such as software, a patent or a process) and the status from planning to capitalised or abandoned.
Hours and costs
Hours or costs per date, per person and per activity, with the distinction between research phase and development phase. You set an hourly rate and a surcharge for indirect costs once.
Test of the criteria
A checklist of the capitalisation conditions. A prohibition on capitalisation, such as for internally generated brands or customer lists, works as a hard block.
Production cost and amortisation
Calculation of the production cost with surcharge and any interest, and amortisation straight-line or declining balance with residual value over the expected useful life. If you indicate that it cannot be estimated reliably, the module calculates with ten years.
Legal reserve and deferred tax
The legal reserve under art. 2:365(2) DCC and an indicative deferred tax based on the rate you set.
Capitalisation report
A report per project with the substantiation, as a Markdown file to download or copy to your file.
What the module does not do
- The module books nothing. You process the journal entry (costs of development against capitalised own production) and the formation of the legal reserve yourself in your records.
- The capitalised project is not automatically entered as a fixed asset in the asset register.
- You enter hours manually; there is no import from a time-tracking system.
- No link with the WBSO or other tax schemes.
- The report is a Markdown file, not a PDF.
How the capitalisation ends up in the annual accounts
After processing, the project is on the balance sheet under intangible fixed assets, with the accounting policy, the amortisation period and the movement of the year in the notes. In equity there is a legal reserve equal to the capitalised costs, which moves with the amortisation. In the profit and loss account the capitalisation shows as capitalised own production, and the amortisation as an expense.
The capitalisation report is the substantiation that the board, and for an entity subject to audit the accountant, wants to see for that choice.
Availability in the app
Add-on, not yet in the menu. This module is built and is taken per workspace as a separate subscription, but is currently not in the app menu: the product focus is on annual accounts, bookkeeping, taxes and payroll. If you want to use the module, please contact us or e-mail info@jaarrekening.io. Current module prices are on the pricing page.
Frequently asked questions
May I capitalise development costs?
Only costs of development, not of research, and only if the project meets the conditions of RJ 210, such as technical feasibility, the intention and ability to complete the asset, probable economic benefits and reliable cost measurement.
What is the legal reserve for capitalised development costs?
A reserve in equity equal to the capitalised costs (art. 2:365(2) DCC). It cannot be distributed and decreases with amortisation.
How long do I amortise capitalised development costs?
Over the expected useful life. If that cannot be estimated reliably, over at most ten years (art. 2:386(3) DCC).
Does the module book the capitalisation in my records?
No. The module documents and calculates; you process the journal entry and the legal reserve yourself.
Does the module take the WBSO into account?
No. There is no link with the WBSO or other tax innovation schemes.
Read more
A substantiated choice for capitalisation
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
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