USA Accounting for depreciation in computer equipement!

[tyleraguilar]

Hey all,

I am doing some work for a client and they are a medical diagnostics company who particularly purchases different computers for there business. What's different is the buy these computers, have a specialist employee supe up the machine so it will run to their standards, and then put it out on the floor.

This process lasts around 2 months, where they are not using any machine hours but are simply purchasing extra parts and using labor to make the machines better.

1. When is an item put into depreciable assets?
-When its ready for use?
-When its actually being used?
-When components are ready?

2. Are leased assets recorded in fixed assets and depreciated like normal assets?

3. What cost can be capitalized into a fixed asset you built yourself?
-Can you add allocation of internal labor to it? How and when?
-It is valued at fair market value or just what you paid in cash for it, in case you modified it and now it worth more

 

[bklynboy]

Item begins depreciating when ready for intended use. Sounds to me that the hardware as purchased is not ready and requires "suping up" to be ready.

Leased assets are depreciated over the lesser of lease term or useful life.

Costs to develop software are specifically discussed in GAAP - it would include internal labor. See ASC 350-40. For hardware I believe that only the costs of external parts and external labor can be capitalized - I am not aware of internal labor permitted for hardware - perhaps someone closer to the topic could advise.

 

[Counterofbeans]

All direct costs (labor, material, payroll, benefits, etc.) of constructing an entity's own tangible fixed assets are capitalized.

Yes, go ahead and capitalize the internal labor related to increasing the performance of the computers