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
be works for thermal insulation to buildings
be works to increase the use of a building by people with a disability or the elderly, or to reduce the risk by fire to users of the building
to finance others to undertake any of these works

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