Recently my company went through a virtualization project in which all our network switches and WiFi equipment were upgraded and configured. As part of this project our vendor built and installed host servers, transferred all data to host servers and rebuilt our office servers with new hardware. All hardware purchased under this project was booked as fixed assets. However, we are left with a significant amount spent in soft costs (installation/cabling/wiring/test running/uploading servers/equipment configuration services). Should these costs be amortized or expensed?
Amortize or expense?
Answers
Based on the information provided in your question, the costs were incurred specifically to install and ready the new servers and hardware for use, without which the hardware would be presumably useless. A determination would need to be made whether the project work extended the usefull life of the rebuilt servers and if so, then these costs should be capitalized as part of the equipment and depreciated over the new useful lives of the network equipment.
Filed Under:
Accounting