Overview of Capitalization Threshold Amounts

You can specify capitalization threshold amounts to automatically capitalize assets based on the defined capitalization threshold.

Optionally specify the low value threshold amount for each asset category so that these low value assets are fully reserved using the specified method and life.

You can enter the capitalization threshold amount in any currency other than the ledger currency of the asset book. When you transfer invoices from Oracle Payables or load assets from the Mass Additions File-Based Data Import template into the corporate book, the Prepare Asset Transaction Data process determines whether the asset should be expensed or capitalized based on the specified threshold values in the ledger currency. The application calculates the capitalization threshold amount in the ledger currency using the threshold conversion rate type and the conversion rate on the date placed in service. This helps ensure a uniform capitalization threshold across various currencies, without the need to adjust the threshold amount due to fluctuations in the currency rates.

The capitalization threshold limit specified in the Edit Asset Book page validates the threshold for all assets in all categories in a currency other than the ledger currency. To override threshold validation in the ledger currency, specify the threshold limit in the Edit Categories page.

To enforce capitalization thresholds in currencies other than the ledger currency, you must opt into the Capitalization Threshold in Foreign Currency feature. To opt in, navigate to:

• Setup and Maintenance > Financials > Change Feature Opt In > Fixed Assets > Edit Feature > Capitalization Threshold in Foreign Currency

Threshold Types

Threshold types determine how the Prepare Asset Transaction Data process performs capitalization validation.

Threshold Type	Description
Asset Cost	Total cost of the asset or source line is compared with the capitalization threshold limit. For example, in 2018 a company with a capitalization threshold of $5000 purchased seven pieces of asset X at $4,400 each, for a total cost of $30,800. The company now wants to create a single asset with seven units. Since the total cost of the asset ($30,800) is greater than the threshold of $5000, the asset type will be Capitalized.
Unit Cost	Per unit cost of the asset is compared with the capitalization threshold limit. Using the previous example, since the per unit cost of the asset ($4,400) is less than the threshold limit of $5000, the asset type will be Expensed.

Threshold Amounts

You can specify two types of threshold amounts.

• Capitalization Threshold

  The Capitalization threshold specifies the minimum cost of an asset to be eligible for automatic capitalization. If the asset cost is less than the capitalization threshold, the asset is automatically expensed.

• Low Value Threshold

  The Low Value threshold specifies the maximum cost of an asset that is considered to be a low-value asset. A low value asset is an asset that needs to be capitalized but it must also be fully depreciated either in the period of acquisition or in the first year of life.

Assets are capitalized using a Low Value Asset depreciation rule if the asset cost is equal to or more than the capitalization threshold, but less than the low value threshold.

For example, if the Capitalization threshold is $3,000 and the Low Value threshold is $5,000:

• Asset cost is less than $3,000: Asset is Expensed

• Asset cost is between $3,000 and $4,999.99: Low value asset will be fully depreciated in the period of addition

• Asset cost is $5,000 or more: Asset is Capitalized