What is depreciation?
Depreciation is the annual charge to income that results from a systematic and rational allocation of cost over the life of the fixed asset. Depreciation normally begins when an asset is purchased or completed. If it is not placed into service immediately, depreciation begins when the asset starts to lose value.
Are Maintenance and repair cost capitalized?
No. Costs associated with maintenance and repairs are expensed in the period incurred. Examples are; custodial services, repainting a room, fixing a leaky faucet, and replacing parts to an engine.
What happens to assets with cost below capitalization threshold?
Assets that do not meet the monetary threshold listed in the fixed assets policy are expensed in the period incurred. Threshold is $5,000 or greater.
What is the capitalization threshold for fixed assets?
The standard capitalization threshold for capitalizing assets has been established as $5,000 or greater. The only exception is land. The capitalization threshold for land is $0.00
What is a fixed asset?
A tangible asset acquired, purchased, constructed, or donated for use in operations and not for investment or sale. Their useful life is longer than two years, they retain their individual identity throughout their useful life and meet the below thresholds.
Capitalization threshold for assets = $5,000 or greater. Capitalization threshold for land is $0.00