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Tangible Asset and Repair & Maintenance Policies 2013

Carolyn Chin's Profile

Does anyone have sample policies to comply with the new final regs for Capitalization of Tangible Asset and Repair & Maintenance which are needed before 2014? The capitalization part is straight-forward, but I wonder about the repair & maintenance part and how to word a policy which is not cumbersome but covers the ifs, thens and buts.


Noman Haider
Title: Mr.
Company: Muntajat
(Mr., Muntajat) |

Well i am also looking for simple but best in class FA capitalization procedures. Urgent help would be great!

Sami Abulehya
Title: Chief Accountant
Company: Laf
(Chief Accountant, Laf) |

Maintenance works are all activities intended to maintain an item of property, plant and equipments in good operating condition.
There are three types of maintenance works, 1) corrective maintenance, 2)preventive maintenance, and 3) improvement maintenance.

The cost of maintaining a part of an item of property, plant and equipment when incurred is recognized in the carrying amount of that item if the recognition criteria are met, which are :
1-it is probable that future economic benefits associated with the item will flow to the entity; and
2-the cost of the item can be measured reliably

Otherwise, subsequent expenditure should be recognized as an expense immediately.

Maintenance works (Expenses)

Any maintenance works incurred in order to maintain the normal usage of the PPE without any changes in the useful life or the existing level of the assets until the end of the depreciation period are considered an operating expenses , these types of works include; Replacement of spare parts , Replacement of wear parts, Small repairs

Maintenance works (Capitalized)

Any maintenance works incurred in order to extend the useful life the asset or to improve the efficiency of the assets are recorded as a capital expenditure. Examples of such improvements are the replacement of major component with a new one or a modification on an assets that improve the performance of the same.

Carolyn Chin
Title: Accounting Mgr
Company: Nippon Sharyo Manufacturing
(Accounting Mgr, Nippon Sharyo Manufacturing) |

Thank you! At first glance, it looks too general for the new Tangible Asset and Repairs regulations (USA), but it's a great start. I am also looking for wording on the partial disposition election part if you have any thoughts.


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