Additions to Equipment
In order to have uniformity in accounting for additions to capital and insurable equipment, the following guidelines shall be followed:
- “Repair” or “maintenance” expenditures shall be recorded as a current expense regardless of the amount. A repair or maintenance expenditure is one that maintains the property at its existing level or existing life of service, such as painting, repair, miscellaneous parts, and normal servicing.
- In general, additions to equipment costing less than $1,000.00 shall not be recorded as equipment. An exception occurs when the original equipment and the addition are purchased within a 12 month period. The addition becomes an integral part of the original purchase (to produce a single functional unit), and the addition significantly extends the useful life or substantially increases the value or capability of the equipment.
If the result of the addition increases the aggregate cost of the equipment, but the total is still less than $4,999.99, the addition shall be recorded as insurable equipment. If the result of the addition increases the aggregate cost to $5,000.00 or more, the addition shall be recorded as capital equipment and the original purchase cost should be transferred to a capital equipment account by journal entry to correct.