During the life of capital equipment, it may be necessary to pay for repair or maintenance of the equipment. Whether you can capitalize these expenses depends on the nature of the repair or maintenance.
Repairs and maintenance expenses are generally NOT capitalized
Repairs and maintenance are expenses a business incurs to restore an asset to a previous operating condition or to keep an asset in its current operating condition. Under Generally Accepted Accounting Principles (GAAP), you must record repairs and maintenance expenses to operating expense in your records and report them on your financial statements in the period in which they were incurred.
The costs for repairs and maintenance refers to normal, regularly recurring expenditures required to keep property in an efficient operating condition; neither adding to the value of equipment nor appreciably prolonging its life. This type of expenditure, regardless of cost, should be expensed and should not be capitalized.
When can equipment repairs be capitalized?
Equipment repairs and/or purchase of parts over $5,000 (including upgrades and improvement) which increase the usefulness and efficiency of the equipment can be capitalized. In such cases, the custody code, commodity code 00330, capital equipment Account code, and existing equipment tag number should be entered in BearBuy.
Refer to the Capital Asset Management Guide and Management and Control of University Equipment (BUS 29) available on Controller’s Office website for more information about managing equipment. If you have questions about equipment management, contact Capital Asset Management.