For those of you who capitalize your software development for hosted or On-Premise software. What is your process? I've heard a few different methods. 1) Employees track hours on tickets. 2) Managers assign percentages to teams. How do you track capitalization?

We first obtain approval for the project to be capitalized, justifying why it is essentially resulting in a material fixed asset that can be depreciated, and what the expected lifespan will be.  We generally track and report hours monthly by person and activity type to our accounting department, who make appropriate GL entries to offset internal labor expense on our IT P&L and accrue expenses to a capitalized account.  Some activity types are not capitalizable, such as performing data conversions.  Any vendor professional services costs for software implementation also accrue similarly.  Subscription costs do not  capitalize and are expensed as incurred.  At project go-live, all accrued capitalized costs will start to expense out to appropriate expense accounts over the life-span of the asset.

We usually track and allocate hours spent on the project.