Common use of Capitalization Policy Clause in Contracts

Capitalization Policy. Owner’s policy is to capitalize all lease commissions in excess of $1,000 and for lease terms of greater than one year. Additionally, any single expenditure for a capital asset which equals or exceeds $5,000 should be capitalized. Any capital expenditure, regardless of amount, relating to a project where total project costs equal or exceed $5,000, should also be capitalized. Please pay close attention to the definition of a capital asset in the capitalization policy. Capital Expense: All types of capital expenditures shall be recorded on a schedule and submitted with the Monthly Financial Reports package. The “Capital Expenditures” form within the Accounting section of the Documents and Forms shows an example of how building improvements and tenant improvements should be listed. Record in detail the monthly expenditures by project or tenant, as applicable. The estimated project cost should agree with the amount budgeted or the amount per the lease proposal. Construction in progress accounts should be used for long-term construction projects until complete to reduce the potential of calculating depreciation on accrued capital or incomplete projects. The total paid per month should agree with the monthly accounting report. Copies of invoices should accompany the capital schedules for all entries made to these accounts. Please note on the schedule the month in which a project is completed. A project is considered complete when the improvement is first put in a state of readiness and is available for a specifically assigned function. Refer to the Capitalization Policy section above for further explanation on what can be capitalized.