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How to differentiate Renovation from R&M expenses? - Printable Version

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How to differentiate Renovation from R&M expenses? - mmohd - 08-05-2011

In accounting, what is the difference between ‘Renovation’ (fixed assets) and ‘Repair and maintenance’ (Profit and Loss expense)?

What kind of expenditure can you classed under each of these? How do I know what I can capitalize (renovation) and what I can write off in the current year (R&M)?

I heard that Renovation is expenditure that can add value to a business property and/or prolong the property's life.

If the expenditure is for a building that is rented and not owned by a business, then it is NOT adding value to the business since the property is not owned by the company, right?

- danishayub_76 - 08-05-2011

All additions, renovations and repairs to capital assets that increase the economic
benefits of the assets should be capitalized. R

Routine costs incurred to maintain the asset in its operating condition are expensed and not included in the Fixed Asset Accounting and Control System (FAACS).

For Example. False ceiling, wooden partition etc. all should be capitalized as it adds economic benefit to the business, though the building is not owned by the organization.