Title: GAAP on Capital Vs. Repair | Small Business - Chron.com
Headings: GAAP on Capital Vs. Repair
GAAP on Capital Vs. Repair
Definition of Capital Expenditure Under GAAP
Repair and Maintenance Expenses
Determining the Differences
Not All Expenses Are the Same

Content: Work considered to be an improvement to the physical space or which significantly extends the lifespan of equipment to the point of increasing the asset's actual value is considered a capitalized expense. For example, if while moving furniture around in your office you smash a hole in the wall, the materials needed to repair the hole and repaint the wall would be considered a repair or maintenance expense, because you were returning the room to its previous condition. However, if you renovated the back part of your storeroom and added plumbing to include a kitchenette and employee restroom, the expenses would be categorized differently. Here, you should be capitalizing building improvements under GAAP guidelines, because you are adding to the value of your building, one of your primary assets. Not All Expenses Are the Same
There can be nuances of understanding when it comes to following the guidelines, particularly as far as the IRS is concerned. For example, should you capitalize painting costs if you repaint the entire outside of your building? Even as a large expense, painting or repainting your office or building is generally considered to be a part of routine maintenance and is therefore a current or deductible business expense. However, if you paint your building or room as part of a larger renovation, which is considered a capital improvement to your property, then the painting can also be capitalized and depreciated over time. For example, if you built an addition to your current space, redid all the windows and then painted the entire building, the painting could then be capitalized as part of the larger capital improvement project. It is always a good idea to consult with an accountant prior to categorizing these types of expenses.