How do you group assets and capitalize them if their cost is under your policy threshold and why?

There are always a lot of questions about Capitalization Policy Threshholds.

There is no simple one-stop answer. There are no clear GAAP guidelines either.

Smaller group purchases may be aggregated and larger purchases may be disaggregated, depending on the accounting policy chosen for those various groups.

When a project is established the accounting treatment is to aggregate all the costs associated with placing the project into service and at the point it is placed into service it is possible that some of the costs will be disaggregated into separate asset categories that have different estimated useful lives. Managing data leads us to combine similar items into categories. Limited data storage leads us to combine assets with similar lives and descriptions into categories. The assets you describe are related to computer equipment, including the phone. Today office phone systems are usually classified as computer equipment depending on their characteristics.

Your question is best answered by your Accounting Manager or Controller or by reviewing the Capitalization Policy as established by your company.

Valerie is correct not to advise you to book your project a certain way, instead giving you things to think about. Let me provide a couple of examples from my newspaper days that may help further guide your thinking.

We regularly purchased hundreds of newsracks at a time that were individually below the threshold but were a major cost in the aggregate. Corporate policy was to record them as a group purchase by recording prepaid expense and amortizing the group over its estimated useful life. This approach smoothed the monthly expenses, which better reflected the benefit the company realized from the purchases.

We undertook a number of major capital projects, the most relevant being a new publishing system. The project involved constructing a new computer room, dedicated electrical and air conditioning services, hardware, software, etc. I tracked the related purchases into their respective categories and placed the assets into service as each phase of the project was completed. Construction and infrastructure carried longer useful lives while the hardware and software carried shorter useful lives. Cost elements such as training and startup supplies were aggregated in the project but not ultimately booked as fixed assets.

The recommendation is for you to develop and apply a capitalization policy that makes sense for your business and your industry. I hope these examples have helped you analyze the problem and develop the best way to go.