capital improvements

(noun)

Activities directed towards expanding the capacity of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, its current use.

Related Terms

Examples of capital improvements in the following topics:

  • Cost of Improvements

    • The cost of an asset improvement is capitalized and added to the asset's historical cost on the balance sheet.
    • Asset or capital improvements are undertaken to enhance or improve a business asset that is in use.
    • The cost of the improvement is capitalized and added to the asset's historical cost on the balance sheet.
    • If the capital improvement is financed, the interest cost associated with the improvement should not be capitalized as an addition to the asset's historical cost.
    • When the cost of a capital improvement is capitalized, the asset's historical cost increases and periodic depreciation expense will increase.

  • Valuing Repairs, Maintenance, and Additions

    • Betterments or improvements to existing plant assets are capital expenditures because they increase the quality of services obtained from the asset.
    • If an expenditure that should be expensed is capitalized, the effects are more significant.
    • The company capitalized the USD 6,000 that should have been charged to repairs expense in 2010.
    • Asset additions/improvements are capitalized to their respective asset accounts on the balance sheet at the market value of the addition.
    • Explain what a capital expenditure is and how a company would account for it.

  • Advantages of Private Financing

    • Private financing can enhance a firm's capital structure, save on costs, and improve managerial incentive alignment.
    • Increased capital: Sometimes going private results in a significant injection of capital, because the investors are willing to buy the company's stock at a higher price than it is trading on the market.
    • In this case, they have a more immediate incentive to improve the company's performance, because they are investors as well.

  • Defining Capital

    • In economics, capital (also referred to as capital goods, real capital, or capital assets) references non-financial assets used in the production of goods and services.
    • Physical Capital: capital that must be produced by human labor before it can become a factor of production (also referred to as manufactured capital).
    • Interest allows capital to be obtained, while profit is the accumulation of the capital.
    • Social Capital is capital that is captured as goodwill or brand value.
    • As a term, it is used to define balanced growth where the goal is to improve human capital and economic capital equally.

  • Development of Human Resources

    • "Human capital" is sometimes used synonymously with human resources, although human capital typically refers to a more narrow view (i.e., the knowledge the individuals embody and can contribute to an organization).
    • Human resources development (HRD) as a theory is a framework for the expansion of human capital within an organization through the development of both the organization and the individual to achieve performance improvement.
    • Training and development (TD), the development of human expertise for the purpose of improving performance
    • Organization development (OD), empowering the organization to take advantage of its human resource capital.
    • TD alone can leave an organization unable to tap into the increase in human, knowledge, or talent capital.

  • Capital Expenditures

    • The following capital expenditures are capitalized:
    • Repairing an existing asset so as to improve its useful life
    • Capitalized expenditures show up on the balance sheet.
    • Capitalized interest, if applicable, is also spread out over the life of the asset.The counterpart of capital expenditure is operational expenditure ("OpEx").
    • The funds used to construct and put a building into use are capital expenditures.

  • Production Inputs and Process

    • Labor, capital, and land are the three necessary inputs for any production process.
    • Production processes require three inputs: land, capital and labor.
    • Capital, otherwise known as capital assets, are manufactured goods that are used in production of goods or services.
    • For a caveman, a stick or a stone would have been considered capital.
    • Any tool or machine that could be used to improve someone's ability to work would be included in capital.

  • Changing Worker Productivity

    • In economics and long-run growth, worker productivity is influenced directly by fixed capital, human capital, physical capital, and technology.
    • The four types of fixed capital include: useful machines, instruments of the trade; buildings as the means of procuring revenue; improvements of land; and the acquired and useful abilities of all the inhabitants or members of society.
    • Human capital and increased worker productivity are critical because they are different from the tangible monetary capital or revenue.
    • Human capital grows cumulatively over a long period of time.
    • Examine the role of human capital in production and economic growth

  • Capitalism, class, privilege, and oppression

    • Capitalism produces enormous amounts of wealth, in addition to increasing levels of inequality, both within the U.S. and around the world.
    • Capitalism is a system that produces cruel consequences.
    • Capitalism causes competition, stress, and anxiety among members of the working class and middle class, as people do not have any control over their work and whether they can keep their jobs.
    • Despite the myth that hard work leads to getting ahead and making it, for the most part people have little power to improve their class position.

  • Reporting R&D Cost

    • Expense R&D, unless items have alternative future uses, then allocate as consumed, or capitalize and depreciate as used.
    • A cost which cannot be deducted in the year in which it is paid or incurred must be capitalized.
    • The general rule is that if the acquired property's useful life is longer than the taxable year, then the cost must be capitalized.
    • The capital expenditure costs are then amortized or depreciated over the life of the asset.
    • For example, routine ongoing efforts to refine, enrich, or improve the qualities of an existing product are not considered R&D activities.