- PurposeThis accounting policy establishes the minimum cost (capitalization amount) that shall be used to determine the capital assets that are to be recorded in ABC Company’s annual financial statements (or books).
- Capital Asset definitionA “Capital Asset” is defined as a unit of property that: (1) has an economic useful life that extends beyond 12 months; and (2) was acquired or produced for a cost of more than $2,500. Capital Assets must be capitalized and depreciated for financial statement (or bookkeeping) purposes.
- Capitalization thresholdsABC Company’s establishes $2,500 as the threshold amount for minimum capitalization. Any items costing below this amount should be expensed in ABC Company’s financial statements (or books).
- Capitalization method and procedureAll Capital Assets are recorded at historical cost as of the date acquired.
Tangible assets costing below the aforementioned threshold amount are recorded as an expense for ABC Company’s annual financial statements. Alternatively, assets with an economic useful life of 12 months or less are required to be expensed for financial statement purposes, regardless of the acquisition or production cost.
- RecordkeepingInvoices substantiating the acquisition cost of each unit of property shall be retained for a minimum of four years.
As an accounting firm, LG&H is an essential service. For the safety of our clients and staff, our office is closed to the public and our staff is working remotely. We can be contacted via phone and email. All returns will be prepared and securely emailed or postal mailed to you. Since most returns are e-filed, we will provide you with a form 8879 for authorization. Please sign and email or fax it to us. If faxing or emailing is not available, we can make other arrangements for your authorization.
We want to extend all the best to you and your families in the troubling time. We are all dealing with many challenges, and will minimize the tax filing process as much as possible.
Sincerely
LG&H
ABC Company Capitalization Policy
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