Every now and then your assets may need service, maintenance and even some fixing. While it makes sense for the service and maintenance to be part of your running expenses, for some reason accountants consider fixing to be part of capitalized cost of the asset. Why? 

One of the possible reasons I guess is that it seems “it’s needed to make the asset work as intended and planned”. While maintenance is to keep the asset working, the fixing means the asset was broken and now we had to enhance it to make it work again. I guess this could be the reason.

Fixing sometimes also includes smaller parts bought for the asset and as such, there seems to be a reason to capitalize the acquisition. I say, “seems” since there really isn’t.

Matter of fact is that if an asset is broken and we can fix it, the spare parts used are always part of either your inventory if they are kept for possible situations we might need them and once used, they are charged to the income statement. We’re not enhancing an asset if it was broken. We’re merely restoring the situation.

However, it is enhancing if the asset starts working more efficient, enables us to do more or would otherwise be amortized and we’re renovating it. Remember that each case should be separately evaluated once making such expenses.