Making Entries in The FAR
Not all assets are capitalized. Keeping in view the concept of materiality, a company may have a policy to capitalize only those assets which cost more than a specified amount. In the US, government agencies are required to expense all equipment whose value is below a threshold limit. Similarly, fixed assets which have a useful life of less than one year are not capitalized.
In some companies, improvements or alterations made to an asset are capitalized separately in the FAR. This is not correct. If such mistakes are made, it is highly probable that the auditors while undertaking physical verification of assets will notice irreconcilable differences. Where improvements or alterations made to an existing asset justifying capitalization, such additions should be made to the cost of the original asset..
Read more about this topic: Fixed Assets Register
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