Fixed assets — Excel guide
Buy something that lasts years and the cost follows it: capitalize, depreciate, and eventually test whether it's still worth its book value.
Capitalize vs expense
Long-lived purchases become ASSETS and depreciate over their life (CapEx); everything else hits expenses now (OpEx). Companies set a capitalization threshold (say $2,500) below which even durable purchases are expensed, a materiality policy.
Depreciation methods at a glance
All methods write off the same total (cost − salvage); they differ in timing. See the Depreciation cheat sheet for the Excel functions.
| Method | Shape |
|---|---|
| Straight-line | Even every year |
| Double-declining | Big early, shrinking |
| Sum-of-years' digits | Front-loaded, linear decline |
| Units of production | Tracks usage, not time |
Book value & impairment
Book value = cost − accumulated depreciation (a contra-asset). If events say the asset can't recover its book value, an impairment writes it down, goodwill gets this test annually, and impairments don't reverse under US GAAP.
Depreciation vs amortization
Same idea, different asset class: tangible assets depreciate, finite-lived intangibles (patents, licenses) amortize. Land does neither.