To Capitalize or Not to…

May 3, 2021

Capital Asset Management
to capitalize or not to

The decision to capitalize a purchase rather than expense it is seemingly straightforward. Does the acquisition cost more than your capitalization threshold? Will it provide benefits for more than one accounting period (useful life more than one year)?  

However, if you’ve ever tried your hand at determining what should be capitalized, you know that it’s not quite that simple. 

So, what do you do when the acquisition is not so black and white? What resources do you use to determine to capitalize or not and how much to capitalize?  

The concept behind capitalization is to spread out the expense of the benefit throughout the duration the benefit is received. The General Accounting Standards Board (GASB) Statement 34 provides the framework for state and local government capital asset accounting. 

In paragraph 18, GASB 34 states the capital assets should be reported at historical costs, including ancillary charges to place the asset in service. This would include shipping and handling, set-up, and site-preparation. That means training costs should not be capitalized, and donated assets should be capitalized at fair value including ancillary charges.  


At HCA, we specialize in capital asset management, accountability, and valuation. Our staff assists public clients daily with asset capitalization and we frequently encounter scenarios that are not as simple as the rules state. We know the best practices and are here to help you bring the decision down to the most basic steps.

Feel free to reach out to us with any questions.