Accounting guidance notes

Extract from the accounting guidance notes

Definition of expenditure for capital purposes:

• The acquisition, reclamation, enhancement or laying out of land
• The acquisition, construction, preparation, or enhancement of roads, buildings or other structures
• The acquisition, installation or replacement of mobile/immobile plant, machinery and apparatus, and vehicles and vessels.

The expenditure on an asset must achieve one of the following to be capital:

• Lengthen the life of the asset
• Increase the value of the asset on the open market
• Increase the use of the asset by the local authority.

Meaning of enhancement: For expenditure on these items to be considered as an enhancement, the expenditure must result in:

• Substantial extensions to asset lives, or
• A substantial increase in open market value of an asset, or
• A substantial increase in the use of the asset.

Examples given of these conditions include:

• Re-roofing buildings
• Structural maintenance of roads
• Installation of new engines in vehicles
• Installation of central heating or double glazing
• Widening of roads
• Bridge strengthening
• Enlargement of leisure facilities so that more people can use the facilities.