Long Lived Assets: Quick Overview on Capitalized Expenditures

​Assets must meet three definitional criteria (i) identifiable and determinable, (ii) under the control of the entity, and (iii) expected to generate future economic benefits. Additionally, there are two recognition criteria being (i) it must be probable that expected future economic benefits will flow and (ii) the cost of the asset can be reliably measured.
 
Capitalized expenditures increases assets on the balance sheet and appear as investing cash outflow on the cash flow statement. Entities allocate the values over the useful life, as depreciation/amortization expense. This reduces profit on the income statement (non-cash expense on the income statement) and reduces the carrying amount on the balance sheet. When the asset does not meet the recognition criteria, the expenditure is treated as an expense on the income statement, reducing net income, which reduces operating cash flows. No assets are recorded.
 
Presentation and Disclosures 
Under IFRS, a company must disclose the following: (i) measurement basis (if revaluation model was used, fair value, revaluation surplus, and the carrying amount of the cost model is needed), (ii) depreciation method, (iii) useful life, (iv) gross carrying amount, (v) accumulated depreciation, (vi) reconciliation of carrying amount, (vii) disclosures of restrictions, and (viii) contractual agreements. This applies for both PPE and IA. GAAP requirements are less, where a company must disclose (i) depreciation expense; (ii) balance of major depreciable assets, and (iii) general description of depreciation methods used in computations. Other disclosure information includes impairment losses (IFRS must disclose any reversals).