USA Capitalization and ASC 842

[DavWil]

Hello all,

I've been pondering this one awhile and have asked other sources, but I can never seem to get a straight answer (of course you never really do with accounting).

For setup, we lease all of our locations. We do not own any of the properties. Our outsourced IT company has begun an upgrade initiative that requires installation of a new framework. Most of this framework is stuff that we cannot take with us should we leave.

I'm new to the company (Private co.) and they've always capitalized these small improvements. I think that's incorrect though. To me, these are lease improvements that are funded by us.

Does anyone have any insight into this?

 

[kirby]

When you lease a space then make improvements to the space these are recorded as leasehold improvement assets on your books. Why do you see your situation as different?

 

[DavWil]

When you lease a space then make improvements to the space these are recorded as leasehold improvement assets on your books. Why do you see your situation as different?

Mainly because of ASC 842. Would this not be something that would go towards decreasing the Right of Use Asset? I'm mainly not sure as my experience with leasehold improvements and ASC 842 is non-existent.

 

[kirby]

No.