---
title: Costs to Fulfill a Contract
description: Direct costs incurred to satisfy a performance obligation that generate resources used in the future, which must be capitalized. They align the recogn...
sidebar_position: 30
tags: ['asc-606', 'Contracts']
---

# Costs to Fulfill a Contract

## The ASC 606 Standard

Direct costs incurred to satisfy a performance obligation that generate resources used in the future, which must be capitalized. They align the recognition of massive upfront expenses with the timing of the associated revenue.

## The Real-World Scenario

You spend $40,000 on engineering labor to build a custom software integration for a client before their multi-year subscription officially begins.

## The Spreadsheet Breaking Point

Manually pulling engineer timesheets to calculate the direct labor cost of custom software setups is an excruciating month-end task.

## The Hidden Cost to the Bottom Line

Failing to capitalize fulfillment costs means you take a massive, unnecessary hit to your gross margins before revenue even begins.

## How GAAPX Eliminates the Risk

Integrates with project management tools to automatically track labor inputs, capitalize the costs, and amortize them against project revenue.