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: 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. If the new part of the asset is similar in nature to the part being eliminated, the substitution is a called a replacement. If the new part represents an improvement in quality over the part being eliminated, the substitution is called betterment. Both replacements and betterments are subject to capitalization if the cost is $50,000 or more. The appropriate accounting treatment is determined by whether the original part of the existing asset is separately identifiable. If separate identification is possible, the new expenditure should be substituted for the portion of the book value being replaced or improved.