Definition
Capital Work in Progress (CWIP)
Capital Work in Progress is the cost of fixed assets under construction or not yet ready for use, recorded on the balance sheet before being capitalised.
CWIP captures spending on plants, buildings and equipment that are being built but not yet operational. Until the asset is ready for its intended use, it is not depreciated; once commissioned, it is transferred from CWIP to fixed assets and depreciation begins.
A large or long-standing CWIP balance can signal heavy ongoing capex and future capacity, but if it stays stuck for years it may indicate stalled projects or cost overruns. Analysts watch CWIP trends to anticipate when new capacity, and the associated depreciation, will hit the P&L.
Related terms
- Capital Expenditure (Capex)Capex is the money a company spends on acquiring or upgrading long-term assets like plants, machinery, and equipment to grow or maintain operations.
- Investing Cash FlowInvesting cash flow is the cash a company spends on or receives from buying and selling long-term assets and investments.
- DepreciationDepreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life, reflecting wear and obsolescence as an expense.
- Capitalisation (Costs)Capitalisation is recording an expenditure as an asset on the balance sheet rather than an immediate expense, to be written off over future periods.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.