The financial accounting term costs subsequent to acquisition refers to additional expenditures associated with property, plant and equipment. In general, companies make four types of investments in existing assets: additions to plant, improvements, reinstallations and repairs.
Subsequent to assets being placed into service, they oftentimes require additional investments to either improve or maintain their productivity. When companies make additional investments in existing equipment that will increase its productivity or add new functionality, that investment is capitalized. When costs are incurred to maintain a given level of productivity, the cost should be expensed.
To capitalize costs associated with existing property, plant and equipment, one of the following three conditions must be met:
Accounting practices categorize new investments in existing assets in one of four ways:
property, plant and equipment, additions, improvements and replacements, reinstallations and rearrangements, repairs, disposition of property, plant, and equipment, sale of property, plant, and equipment, involuntary conversions, acquisition cost