it's a good question as quoting the book you should capitalise anything that's used over more than one financial period. However, nobody would think to capitalise a stapler so the real question as you've hit on is the figure where expenses stop and capitalisation begins.
To some extent that comes down to the assets materialarity to the business as to a multi million pound business £10k may be inconsequential (and hence expensed) whereas to smaller businesses that would be very material and capitalised.
Some accountants have posted on here in the past that as a general rule they set a capitalisation threshhold of £500. But I've also seen an asset of £20 capitalised (it was a kettle). All in all this is a grey area and within reaason (see below) is often very much down to a matter of judgement.
If however you feel that the amount is material to the financial statements then it must be capitalised. The rules for what makes an asset material are as follows :
If the Asset is less than 0.5% or turnover, 1% of total Assets or 5% of profit then it is immaterial.
If the Asset is greater than 1% of turnover, 2% of total Assets or 10% of profit then it is material.
If the figure falls between those figures, i.e. 0.5% to 1% of turnover, 1% to 2% of total assets or 5% to 10% of profit then it's very much a judgement call based on putting yourself in the position of someone with no prior knowledge of your business reading the financial statements.
Hope that helps and welcome to the forum,
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
