ACCOUNTING FOR PROPERTY ACQUISITIONS – WARRANTY REPLACEMENTS - 8637

Capital assets/property which are replaced with new capital assets/property under a warranty contract should be accounted for as follows:

1. The old capital asset/property and any related accumulated depreciation should be reversed from the asset accounts.
2. The replacement capital asset/property should be recorded at the acquisition value plus related costs (i.e., the price that the agency/department would have had to pay to purchase an equivalent capital asset/property on the date received). Depreciation should begin when the replacement capital asset is placed in service.