Capitalising low value items

Kanban buckets being purchased, should they be capitalised

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Despite having read the rules;

PPE are tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and are expected to be used during more than one period.

I am still confused on some items of expenditure.  For example, say in a manufacturing environment the company purchases plastic storage boxes to better store stock.  On their own these items are low value and in small quantities would normally be expensed.  But what happens if they are purchased in large quantities?  If you capitalise several hundred of these boxes as one asset (being an aggregate group of similar items). 

When you do your fixed asset audit and go off into the factory to look for all these boxes and can only find half because the other half have been lost or broken, how do you account for that?  Seems like an administrative nightmare to me.

I would be interested to know your thoughts on this and how you would deal with.

Replies (13)

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By Duggimon
23rd Mar 2017 14:30

I would capitalise each bucket at cost, record individually on the fixed asset register, and depreciate over their useful economic life. I have a 25 year old bucket at home so would consider 4% on cost reasonable.

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Replying to Duggimon:
paddle steamer
By DJKL
23rd Mar 2017 14:48

Too high, Oor Wullie has had his bucket for far longer, over 80 years, and it is still in use.

Then again it may be a bit like Trigger's broom in Only Fools.

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Replying to Duggimon:
Flag of the Soviet Union
By thevaliant
23rd Mar 2017 15:12

You will, of course, need to label each bucket up individually so if any are lost or destroyed before this 25 year life, they can individually be disposed on from the register.

Or sold. You might sell one or two, and make a profit on disposal.

Thanks (1)
Routemaster image
By tom123
23rd Mar 2017 14:51

It is the cost of the individual item, rather than the quantity of them purchased, that determines (for me, anyway) whether I am going to capitalise the item.

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Hitch photo
By Kevin Kavanagh
23rd Mar 2017 15:18

There's a hole in my bucket, so I'll probably just write it off.

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By Duggimon
23rd Mar 2017 15:40

Can't wait for MTD so I can update my bucket count daily and keep on top of the tax implications.

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By Duggimon
23rd Mar 2017 15:44

Going to send HMRC so many slightly different pictures of buckets.

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Replying to Duggimon:
paddle steamer
By DJKL
23rd Mar 2017 16:00

Well really, that's really beyond the pale.

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By Barochan
23rd Mar 2017 16:21

Glad to have brightened your day up.

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Replying to Barochan:
Stepurhan
By stepurhan
23rd Mar 2017 16:33

Barochan wrote:

Glad to have brightened your day up.

Glad to see you have not got offended at the light-hearted ribbing.

As others have said, I would be inclined to write it off on the basis that no individual item has a material value.

If you were to value the mass of buckets as a single asset then you'd want to do an impairment review every year. If half the buckets are missing at year end, you'd write off half the value (plus probably some more for the remaining buckets being worn).

But, as you said, an admin nightmare. Probably not going to get anyone in a stew if you just write them off on purchase.

Thanks (1)
Replying to Barochan:
paddle steamer
By DJKL
23rd Mar 2017 16:49

Well, looks like you have a handle on it now.

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Red Leader
By Red Leader
23rd Mar 2017 17:25

I would gather them all together and adopt the herd basis. (Of course, if they refused, I would kick them.)

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By Barochan
23rd Mar 2017 17:49

Not offended at all. Nothing better than some light hearted banter.

Although some of the one liners should be chucked in said bucket!

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