Setting a Higher Capitalization Threshold for Better Fixed Asset Control

Sep 15 2014

Don’t try to keep track of numerous smaller assets. There is no need to put an asset tag on everything that you have purchased with the intent of lasting for more than one year, and some experts advise organizations to charge off small items as acquired to expense. There are companies that use a $500 minimum capitalization but doing so could result in thousands or tens of thousands of line items in your fixed asset register, making the task of controlling these assets nearly impossible. A fixed asset record should be kept for the major items that are of significant importance.

Many companies are now setting the minimum capitalization level at $2,500 or $5,000 giving them much better control over their fixed assets. Stripping the fixed asset register of thousands of smaller assets makes physical auditing a manageable task, less likely to be pushed off from year to year. Companies that maintain a manageable fixed asset register are more in control of their fixed assets and carry out more frequent physical audits, making them more compliant with government and accounting rules and regulations.