Capitalization Legal Meaning and Definition

Here is a simplified definition of the legal term Capitalization.

Capitalization (noun)

Capitalization is a process in which a cost, previously recognized as an expense, is spread over multiple future periods as an asset. Typically seen in accounting, this method recognizes that the benefits from that expense will extend beyond the current fiscal period. In effect, instead of accounting for the entire expense in the present, it is proportionally allocated to future years.