Capitalized or expense maintanance cost


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If a company performs different types of maintenance (preventive and corrective) on its equipment. Those maintenances perform in a regular basis are expensed but those label as of "mayor overhauls" are capitalized because of the material amount spent and the pieces to be changed. The amount capitalized is amortized until the next mayor overhaul happens, which is 3 years and it is posted in a specific account. Besides, labor is not capitalized only spare parts. Does this policy agrees with USGAAP if so could you tell me the technical reference.

Thank you in advance
 
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Counterofbeans

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For US GAAP, when evaluating Repairs & Maintenence, it's not the $$ spent that determines capitalization, it's the idea of whether the repairs/maintenence increased the value or extended the useful life of the fixed asset that determines whether or not you capitalize the costs. Ordinary repairs and maintenence are simply expensed, as they do neither.

Major overhauls are generally capitalized as such probably extended the useful life of the asset.
 

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