charity capitalising refurbishments

[joannacodarin]

Hi there. I work for a charity and we are undergoing some large refurishments on our Day Therapy Unit. This includes walls being knocked through to make larger rooms and new kitchens & bathrooms fitted - aswell as replastering and new flooring all around

I wouldnt call it repairs , its just an over haul and some new rooms created ... For us its beneficial to capitalise as we dont pay tax. Can we capitalise it ?

I am new to the charity sector and so would appreciate some advise / experience in this area

Thanks!

 

[bklynboy]

Capitalizing assets and improvements is not unique to not for profits and follows the same general rules for all companies. GAAP requires a company to capitalize expenditures that extend an asset’s useful life, increase its capacity or efficiency, or cause any other increase in benefits. This is the case you describe and qualifies for capitalization.

You should capitalize these costs over their expected useful life. If this is a lease its over the shorter of useful life or lease term (including renewal options likely to be exercised). Note that this is US GAAP guidance though I understand IAS 16 has the same general rules under IFRS.