Capitalization Thresholds: What Are They And How Do They Affect Fixed Asset Accounting?

Managing your organization’s fixed assets can be a lot of work. It takes a team and a good bit of time to ensure the assets you need to account for are being tracked in an organized and accurate manner. So, how do you determine which assets need to be tracked and which ones don’t? It all starts with capitalization thresholds. To effectively track fixed assets, you need to have a plan in place that considers how your organization will manage assets both above and below the capitalization threshold.

WHAT IS A CAPITALIZATION THRESHOLD?

A capitalization threshold is the minimum cost at which an asset must be reflected in your accounting records and financial statements. Capitalization thresholds apply to organizations using tax payer dollars to obtain their assets such as public schools and local governments. Assets purchased with these funds are tracked and disclosed to encourage proper stewardship and provide transparency into how tax payer funds are being utilized.

WHO ESTABLISHES THEM?

Capitalization thresholds are determined by regulatory bodies and policies such as GASB 34 and OMB A-133. Your organization may also establish its own threshold based on audit requirements and individual accounting goals. It’s always a good idea to check with your auditor before setting your policy!

SHOULD I ONLY TRACK ASSETS ABOVE THE THRESHOLD?

This is a great question, and the answer is different for every organization.  Tracking assets below your threshold can mean more work. However, there are also many benefits.  Assets that may fall below the threshold like laptops, tablets, or e-readers can sometimes be more easily lost or stolen.  By tracking these assets including their location, the individuals responsible for them, and their useful life you can help limit theft and better budget for their replacement.

HOW CAN I MAKE MANAGING ALL OF THESE ASSETS FASTER AND EASIER?

By establishing a system to record and continuously maintain information on the assets your organization tracks, you can save time and make reporting easier. Tools like spreadsheets, internal databases, or fixed asset management software solutions provide a vehicle for tracking everything from purchase cost and location to useful life and depreciation. Implementing internal policies and a tracking system that fits your organization is critical to achieving efficient and accurate asset tracking.

A thorough review of legislation (e.g. GASB 34 and OMB A-133), a detailed conversation with your auditor, and a thoughtful plan for assets both above and below your capitalization threshold should set you on a path for compliance and asset management success.



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  • Understanding capitalization thresholds is critical to effectively managing fixed assets: http://www.assetworks.com/capitalization-thresholds/
  • Capitalization thresholds are determined by regulatory bodies and policies such as GASB 34 and OMB A-133: http://www.assetworks.com/capitalization-thresholds/
  • When establishing an asset management plan, be sure to consider assets above and below the capitalization threshold: http://www.assetworks.com/capitalization-thresholds/

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