Recently the government have made announcements about taxable entities being able to write off smaller capital purchases less than $5,000 for tax purposes. This has been done in response to COVID-19 but how does this relate to end of year financial reporting for us?
The view that we need to report fixed assets in according with tax legislation sounds a simple approach but is the wrong starting point. What is a “asset” and therefore should be capitalised is determined by the financial reporting standards NOT by the IRD.
An “asset”is defined, for financial reporting purposes, as a resource controlled by the entity as a result of past events (which would usually be transactions), from which future economic benefits are expected to flow to the entity.
In the past the Church has said that items under $500 would be written off rather than capitalised but it really depends on the item. Should we capitalise a mobile phone, fax machine, computer printer, etc which costs $475.00 be capitalised so we know we have one and one we can track?
The Board of Administration has not changed its stance about capitalising expenditure over $500. However, look at the item and see if it at asset and if you need to monitor it and track it.