Computer software that is propriety in nature and is necessary for a capital equipment purchase to be functional should be included in the capital cost of the equipment.
G.Equipment Systems Comprised of Components
Components of an equipment system may be combined and capitalized for a single cost amount. Equipment systems are defined as scientific or other complex systems comprised of several or a number of individual equipment components that are part of a functional unit that is capitalized as a single asset for a combined total cost. The combined cost of all the components is capitalized even though the cost individual items may be less than $5,000.
Equipment items that function as a part of a system but which will be collectively disposed of at the end of the useful life of the system may be considered for capitalization as a single cost rather than as individual pieces of equipment.
The expected life of an equipment system should approximate that of the primary components if they were capitalized separately unless there is a known or established life expectancy of the system. Replacement components may be charged to expense if the items do not materially enhance or extend the life of the system. Components that are added to a system to increase functionality and life should be evaluated with discretion, and if deemed necessary, combined with the depreciated cost of the original system to form an improved or refurbished capital asset with an appropriate adjusted life expectancy.