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• Removal of a major part or component of equipment and the
substitution of a new part or component that increases either the
value or useful life

• 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.

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