Capitalization of Renovation Costs

There are two conditions that enable the capitalization of renovation costs. Either the property is being extended (extension, story addition, or refurbishment). Or a significant improvement over the original condition takes place, increasing the standard of at least three of the following four areas (heating, plumbing, electrical installations, and windows). In this case, renovating costs can also be activated. Accordingly they must also be accounted for on the asset side of the company’s balance sheet. These modernization costs can also be differentiated from maintenance costs in the budget planning tool.