[Code of Federal Regulations]

[Title 48, Volume 7]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR9904.404-40]



[Page 365]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

     CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL 

           PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET

 

PART 9904_COST ACCOUNTING STANDARDS--Table of Contents

 

Sec. 9904.404-40  Fundamental requirement.



    (a) The acquisition cost of tangible capital assets shall be 

capitalized. Capitalization shall be based upon a written policy that is 

reasonable and consistently applied.

    (b) The contractor's policy shall designate economic and physical 

characteristics for capitalization of tangible assets.

    (1) The contractor's policy shall designate a minimum service life 

criterion, which shall not exceed 2 years, but which may be a shorter 

period. The policy shall also designate a minimum acquisition cost 

criterion which shall not exceed $5,000, but which may be a smaller 

amount.

    (2) The contractor's policy may designate other specific 

characteristics which are pertinent to his capitalization policy 

decisions (e.g., class of asset, physical size, identifiability and 

controllability, the extent of integration or independence of 

constituent units).

    (3) The contractor's policy shall provide for identification of 

asset accountability units to the maximum extent practical.

    (4) The contractor's policy may designate higher minimum dollar 

limitations for original complement of low cost equipment and for 

betterments and improvements than the limitation established in 

accordance with paragraph (b)(1) of this subsection, provided such 

higher limitations are reasonable in the contractor's circumstances.

    (c) Tangible assets shall be capitalized when both of the criteria 

in the contractor's policy as required in paragraph (b)(1) of this 

subsection are met, except that assets described in subparagraph (b)(4) 

of this subsection shall be capitalized in accordance with the criteria 

established in accordance with that paragraph.

    (d) Costs incurred subsequent to the acquisition of a tangible 

capital asset which result in extending the life or increasing the 

productivity of that asset (e.g., betterments and improvements) and 

which meet the contractor's established criteria for capitalization 

shall be capitalized with appropriate accounting for replaced asset 

accountability units. However, costs incurred for repairs and maintenace 

to a tangible capital asset which either restore the asset to, or 

maintain it at, its normal or expected service life or production 

capacity shall be treated as costs of the current period.



[57 FR 14153, Apr. 17, 1992, as amended at 61 FR 5522, Feb. 13, 1996]