Glossary · Finance operations
Capitalization policy
The written threshold and useful lives that decide what becomes a fixed asset and what is expensed.
A capitalization policy states the dollar threshold above which purchases of equipment, furniture, leasehold improvements, and software are recorded as assets rather than expensed, along with the useful life assigned to each class. A typical early-stage biotech uses a threshold between $2,500 and $5,000 and lives of three to seven years for lab equipment.
The policy also addresses construction in progress for lab build-outs, the treatment of internal-use software development, and the point at which equipment with an alternative future use is capitalized rather than charged to R&D under ASC 730. Assets are tagged, tracked in a register, and physically verified at least annually.
It is a one-page document that saves hours of audit questions about why one microscope was capitalized and another was not, and it supports the depreciation that flows into R&D and G&A.
General explanation, not accounting, tax, or legal advice for any specific company. Standards and tax law change; the entry reflects my understanding as of September 2026.