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• Addition of a new wing on a building

• An improvement that meets the capitalization threshold in Section
VIII should be capitalized.

C. Repair and Maintenance

Maintenance and repairs can be distinguished from betterments and improvements
in that maintenance and repairs are not intended to alter or change the asset or to
increase the useful life of the asset, but rather to sustain the asset in its present
condition. A cost will qualify as maintenance if any of the following are true:

• Recurs on an ongoing basis (scheduled maintenance) and keeps the
asset in a useable condition.

• Does not add substantially to the value of the asset (i.e., it does not
meet the requirements in Section VIII to be capitalized).

• Simply restores a capital asset to its former condition, addressing
normal wear and tear associated with the use of an asset.

• Facilitates asset utilization for its original useful life
Examples include:

• Painting and similar activities

• Engine overhaul in a vehicle

• Resurfacing a roof with similar materials

• Remodeling and rearrangement costs

Expenditures attributable to repair and maintenance after the asset has been placed
in service will not be capitalized and will instead be charged to maintenance
expense.

Depreciation

Depreciation is defined as a reduction in the value of an asset with the passage of
time, due in particular to wear and tear. Depreciation will be calculated and
recorded monthly for the City’s depreciable assets in accordance with GAAP.
FMS is responsible to record depreciation on a monthly basis.

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