Title: Procedures for Capitalizing Fixed Assets | Tennessee Board of Regents
Headings: Procedures for Capitalizing Fixed Assets
Procedures for Capitalizing Fixed Assets
Land
Land Improvements
Leasehold Improvements
Buildings
Additions to Buildings and Improvements
Additions
Example:
Improvements to Buildings
Example:
Example:
Example:
Examples:
Infrastructure
Nonexpendable Personal Property
Software
Livestock

Content: Two major issues are involved with accounting for additions and generally requires some professional judgment: Useful life: If the estimated useful life of the addition is independent of the building to which it relates, the addition is treated as a separate asset and depreciated over its estimated useful life, regardless of the life of the original asset. If the addition is not independent of the original asset, the useful life must be determined in relation to the original building. In this case, the cost of the addition is depreciated over the shorter of the estimated life of the addition or the remaining life of the original building. Capitalized costs: If the original building was constructed with a plan to expand, cost related to the original building incurred when the addition takes places should be capitalized. However, costs that could have been avoided with appropriate planning at an earlier date should be expensed rather than capitalized. Improvements to Buildings
Improvements represent the substitution of a new part of an asset for an existing part. For example, the roof of a building may be replaced or a new HVAC may replace an old HVAC system.