What constitutes the total cost of a fixed asset:
- Purchase price of the item and related taxes
- Construction cost of the item, which can include labor and employee benefits
- Import duties
- Inbound freight and handling
- Interest costs incurred during the period required to bring an asset to the condition and location necessary for its intended use
- Site preparation
- Installation and assembly
- Asset startup testing
- Professional fees
Also, assign to a fixed asset the cost of major periodic replacements. For example, an aircraft requires new engines and a building requires a new roof after a certain usage interval or time period. Upon replacement, the new items are recorded as a fixed asset, and the carrying amounts of any replaced items are derecognized.
Costs Not to Assign to a Fixed Asset
The following costs should not be assigned to a fixed asset:
- Administration and general overhead costs
- Costs incurred after an asset is ready for use, but has not yet been used or is not yet operating at full capacity
- Costs incurred that are not necessary to bring the asset to the location and condition necessary for it to operate
- Initial operating losses
- New customer acquisition costs
- New facility opening costs
- New product or service introduction costs
- Relocation or reorganization costs
Do not recognize as a fixed asset the ongoing costs of servicing a fixed asset, which typically includes maintenance labor, consumables, and minor maintenance parts; these costs should instead be charged to expense as incurred.
https://www.tbr.edu/business/procedures-capitalizing-fixed-assets
https://www.investopedia.com/terms/a/acquisition-cost.asp
https://www.millersville.edu/accounting/procedures/fixedassets.php