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.
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.
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.
.jpg)
