Title: GAAP Accounting for Capital Improvements | Bizfluent
Headings: GAAP Accounting for Capital Improvements
GAAP Accounting for Capital Improvements
TL;DR (Too Long; Didn't Read)
Fixed Assets and Useful Life
Repair vs. Capital Improvement in GAAP
Expense and Improvement Bookkeeping
Improvements to Land
Depreciating Capital Improvements
Setting the Cap Limit
Case by Case
Must I Use GAAP?
Capital Improvements and Taxes
Section 179
Bonus Depreciation
Tax Depreciation of Improvements

Content: Fixed Assets and Useful Life
Knowing the difference in GAAP between making repairs to business property and capitalizing building improvements, for example, requires understanding fixed assets and their useful life. Fixed assets include vehicles, computers, furniture, buildings, land and machinery, among other items. To qualify as fixed, an asset has to have a useful life greater than one year and be worth more than the company's capitalization or cap limit. By treating purchases below the cap limit as expenses, businesses can skip the record keeping required for depreciating capital assets. 00:00
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Useful life is how long your accounting treats an asset as having value. If an asset's useful life is five years, for example, you depreciate 20% of the asset's cost every year. Useful life is an accounting approach, not a requirement that you junk the asset and replace it when the life span expires. Repair vs. Capital Improvement in GAAP
When do repairs to fixed assets become capital improvements? Under GAAP, they have to accomplish one of three things: Extend the asset's useful life
Enhance the overall value
Adapt the asset so it can be used in a new way
Everything else is an expense.