The term has two meanings:
of several methods for distinguishing between capital costs (Capex) and non-capital costs.
2. A method for determining which assets should be
included in the scope of a reserve study.
- This method establishes that any repair
or replacement expenditure over a certain amount is a capital cost. For
example, some clients set $5,000 as their threshold, below which costs are
expended from the operating budget. Also referred to as the capital cost threshold.
- This method determined which assets are to be included in the scope of a study based on the service life of the assets and replacement interval.
For example, assets with a service life of less than 30 years are often
considered legitimate consideration for a reserve study.