BUR, page-7

I don't really have a problem with their capitalization of certain costs (within reason) - all it does is move the timing of profits but you'll get to the same spot in aggregate. It's also something many companies do but it's just not explicitly disclosed - for example, a company can load up its COGS expense with certain incidental costs so the expense isn't recognised in the P&L until the good is sold, but that just means your gross margin will be lower than the competitor who recognises more costs upfront and has a higher COGS margin. In IMF's case, if they expensed 100% of employee costs you'd get an ~$8m expense pop immediately (see below), but then the gross margin (or MOIC) would pop by the same $8m because the intangible asset realised would be $8m lighter.

Interestingly (and this is something i didn't realise until you raised it), IMF has been progressively capitalising less and less of its employee costs into its intangible asset balance - set out below is the progression since 2011:

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8
1		2011	2012	2013	2014	2015	2016	2017H1
2	External costs	$43.64	$46.33	$58.63	$71.23	$75.30	$119.47	$135.41
3	Internal costs	$14.13	$14.88	$19.01	$17.99	$16.50	$17.57	$16.87
4	Borrowing costs	$1.82	$4.80	$8.49	$9.42	$7.68	$8.60	$9.58
5	TOTAL	$59.59	$66.01	$86.13	$98.64	$99.48	$145.63	$161.86
6
7	Capitalised wages as % of total wages	67.00%	49.00%	61.00%	52.00%	37.00%	28.50%
8	Employee benefits expensed through P&L	-$3.69	-$7.00	-$4.69	-$6.62	-$10.16	-$20.78
9	Implied total employee benefits expense	-$11.19	-$13.72	-$12.03	-$13.80	-$16.12	-$29.07
10	Implied capitalised wages	-$7.50	-$6.72	-$7.34	-$7.18	-$5.97	-$8.28

Given that the footnotes to the annual accounts tell us what percentage of employee costs are capitalised, we can imply their total employee expenses by backing out the capitalised expense and adding it to the P&L expense. This shows what their true total employee cost base is ($29m in FY16, of which $8m was capitalised and $21m was put through the P&L).

My read of this is that either they're being more conservative (by capitalising less employee cost), or they've added an enormous amount of employee expense which isn't working directly on cases (so they cannot capitalise that cost). I suspect it's more of the latter.