Finance and data

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.
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Last updated: 18 Oct 2021