Moneyzine
Contents
/Investment Guides /Repairs to Property, Plant, and Equipment

Repairs to Property, Plant, and Equipment

Moneyzine Editor
Author: 
Moneyzine Editor
2 mins
September 21st, 2023
Advertiser Disclosure

Definition

The financial accounting term repairs to property, plant, and equipment refers to a category of cost subsequent to acquisition. Repairs are typically broken down into two subcategories: ordinary and major. Ordinary repairs are typically expensed, while major repairs may be capitalized if certain criteria are met.

Explanation

Subsequent to assets being placed into service, they oftentimes require additional investments to either improve or maintain their productivity. Repairs are one of four categories of these investments; the others include additions, reinstallations, and improvements and replacements.

To capitalize costs associated with existing property, plant and equipment, one of the following three conditions must be met:

  • The quality of output is enhanced in some manner. The units produced contain functionality that was not present prior to the investment.

  • The useful life of the asset is extended. For example, the expected service life of the asset is longer after the investment.

  • The capacity or productivity of the equipment increases. The units of output are higher.

Generally, there are two forms of repairs companies make to existing equipment:

  • Ordinary: includes normal maintenance to equipment to provide adequate operating performance. Lubrication, painting, cleaning, and replacement of inexpensive or expendable parts are examples of these ordinary repairs. By their very nature, these are operating expenses and costs would typically flow to the income statement.

  • Major: includes costs that would extend the serviceable life of the asset such as the complete overhaul of machinery or equipment. If a major repair is material, the cost can be capitalized. Depending on the nature of the repair, the capitalization treatment would be carried out in the same manner as an addition, replacement or improvement.

Related Terms

property, plant and equipment, costs subsequent to acquisition, additions, improvements and replacements, reinstallations and rearrangements, disposition of property, plant, and equipment, sale of property, plant, and equipment, involuntary conversions

Explore Investing Further

Trading has never been easier, thanks to the rise of online platforms that enable you to buy and sell various assets at the click of a button. But with so many options available, it can be challenging to decide which platform is right for you.
Looking for a way to avoid swap fees while trading forex?
Below listed are the small reviews of the top 10 ETF brokers available across the United States.
Our top beginner's pick for copy trading is eToro. Read on for more details, plus seven good alternatives.
Swing trading stocks can be a great way for investors to take advantage of short-term stock market movements and gain significant returns. If you're interested in swing trading, the key to success lies in selecting the right stocks to buy and sell quickly for a profit.
The table below lists the best stock picks under $2, listed on public exchanges.
The table below lists the best stock picks under $1, listed both on public and OTC exchanges.
This section will highlight the best EV-trading penny stocks available in the United States.
The demand for sustainable energy has grown rapidly in recent years. This has resulted in increased scrutiny of the automotive market. As a result, the electric vehicle (EV) industry has made significant advancements.
Intelligent Bio Solutions Inc. is a life sciences company, founded in 2016 with headquarters in New York and is engaged in performing diagnostic tests, real-time monitoring, and non-invasive surgery for its patients. The firm has developed a CoV-2 Biosensor, which can be used in RNA virus detection.
Hour Loop was founded in 2013 with headquarters in Redmond, Washington. It’s an online retailer involved in e-commerce in the United States that hit the public markets on Jan 7th of 2022. The company sells home/garden decor, electronic products, kitchenware, and apparel through walmart.com, amazon.com, and hourloop.com.

Related Content

DRIP Brokers: Best Brokers for Dividend Investing for March 2024
Reinvesting dividends could mean compound growth for your portfolio. But reinvesting them manually can be a hassle. This is why you could benefit from a dividend reinvestment plan (DRIP).
March 12th, 2024
How To Invest in Real Estate Without Becoming a Landlord
We all know that in order to build wealth and prepare for retirement, investing is the key. However, it can be hard to figure out what to invest in and how to put your money to good use. One of the most talked about ways to build wealth is owning property and being a landlord to bring in passive income. But what if you don’t want to do that? You can still invest in real estate!
March 6th, 2024
Investing In Nature: The Closest You'll Get To Your Money Growing On Trees
ESG (Environmental, Social, and Governance) has become a polluted word for many traders and investors - but that doesn't mean it's going completely away. Nor does that mean you can't profit from nature or sustainable practices. But there are some opportunities in the regenerative ag, conservation, and green real estate spaces.
February 29th, 2024
The Versatile World of Financial Instruments: What Are Futures Contracts?
The financial landscape is as vast as it is complex, woven with various types of instruments that cater to the myriad needs of traders and investors alike. Among these, futures contracts play a significant role, especially for those looking to hedge against risk or speculate on the price movements of assets.
February 21st, 2024
How to Invest $100 and Grow it to 6 Figures
Turning $100 into six figures is a goal no one should realistically have. But it's the question you might ask yourself: Can it be done? Sure. Probable? It's less probable than winning the lottery, but technically still probable - like finding a needle in a haystack the size of Canada. But possible? Absolutely.
February 19th, 2024

Contributors

Moneyzine 2024. All Rights Reserved.