Capitalised costs

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

Capitalising a cost means recording it as an asset on the balance sheet, written off over time, instead of as an expense in the year it is paid. That is right for spending that will earn over years, but it also moves spending out of the profit and loss account and so lifts EBITDA, which is why a credit desk reads what has been capitalised and whether it is growing faster than the business. The cash has left either way, but capitalised spending is reported as investing rather than operating cash flow, so it lifts operating cash flow as well as profit.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.