A non-profit hospital's asset definition is >$1500, but they want to buy 10 chairs at $200 each - for a total purchase price of $2000. The useful life of the chairs would be 15 yrs, per AHA guidelines. Can this purchase be capitalized & depreciated over the life or must it all be expensed in the current year?
To determine whether the purchase of the chairs can be capitalized and depreciated over their useful life or must be expensed in the current year for a non-profit hospital, we need to consider the hospital's asset definition and the guidelines provided by the AHA (American Hospital Association).
1. Check the Asset Definition:
First, we need to determine how the non-profit hospital defines an asset. If their asset definition states that assets are items with a value greater than $1500, then the purchase of the chairs would meet this requirement as the total purchase price is $2000.
2. Review AHA Guidelines:
Next, we need to review the AHA guidelines for capitalization and depreciation of assets in a hospital setting. According to the information you provided, the useful life of the chairs would be 15 years as per AHA guidelines. This suggests that the chairs may be considered a long-term asset that can be capitalized.
3. Consider Accounting Standards:
To get a definitive answer, we also need to consider the relevant accounting standards applicable to non-profit organizations and the specific guidelines for capitalization and depreciation of assets.
For non-profit organizations, the Generally Accepted Accounting Principles (GAAP) provide guidance on accounting for tangible assets. Under GAAP, assets are generally capitalized if they meet certain criteria, including exceeding a specific dollar threshold and having a useful life beyond the current reporting period.
4. Consult with Accountant or Finance Department:
Given the complexity of accounting standards and guidelines, it is advisable to consult with the hospital's accountant or finance department. They will have a more detailed understanding of the hospital's specific policies, any additional regulations that may apply, and can provide a definitive answer based on their expertise and knowledge of the organization's financial practices.
Remember, while this explanation can guide you in understanding the factors involved in capitalizing and depreciating assets, it is crucial to consult with professionals who can provide the specific information and guidance based on the non-profit hospital's policies and accounting practices.