If, later during the course of the project, it is discovered that the determination was incorrect, the building steward will inform Financial Services and request the correction. Accounting will make the transfer for fund sources other than plant funds. Any job that is not properly classified will be brought to the attention of Financial Services. Financial Services personnel will then reclassify these expenditures. Capital improvements should be distinguished from ordinary repairs that are expenses that maintain the existing asset in normal operating condition and should be expensed immediately.
Additions are extensions, enlargements, or expansions made to an existing asset.
Also, work done on the existing asset to accommodate the addition should be regarded as part of the cost of the addition and capitalized. Examples of additions are an extra floor added to a building, the addition of an air conditioning system to an office, the addition of pollution control devices to comply with some laws. Improvements and replacements are substitutions of a part of an asset for another. While replacement is the substitution of an asset of basically the same type and performance capabilities, improvement is the substitution of a better asset with superior performance capabilities. Replacements are considered as ordinary repairs and maintenance and are expensed as opposed to capitalized.