DEFINITION of 'Extraordinary Repairs'

Extraordinary repairs, in accounting, are extensive repairs to property or equipment which prolong its useful life and increase its book value, in contrast to ordinary repairs which are considered normal preventive maintenance, and expensed.

BREAKING DOWN 'Extraordinary Repairs'

The accounting treatment of extraordinary and ordinary repairs is different. Extraordinary repairs are capitalized, which means the repair cost increases the book value of the fixed asset that was repaired, increasing depreciation expenses over the revised remaining life of the asset. Ordinary repairs are simply recorded as expenses in the current period, leaving the book value of the asset unchanged. Installing a new engine in a truck would be an extraordinary repair, while getting an oil change would be an ordinary repair.

However, if the amount spent on an extraordinary repair is immaterial, it is more efficient from an accounting perspective to charge the cost to expense as incurred, rather than adjusting the fixed asset records. Similarly, if a machine’s expected life is only prolonged by a few months, it is more efficient to charge the repair cost to expenses. According to generally agreed accounting principles extraordinary repairs are generally capitalized if the useful life is increased by more than a year.

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