What are Major Repairs?

Major repairs involve large expenditures that extend the useful life of an asset. The cost of a major repair is capitalized, rather than being charged to expense as incurred.

Examples of Major Repairs

Here are several examples of major repairs:

Electrical system replacement. Replacing all major electrical wiring and circuits in a building updates its capacity and efficiency and improves safety standards.
Engine replacement. The engine in a forklift is replaced, thereby extending the lifespan of the equipment.
Parking lot repaving. Repaving a parking lot for a commercial property increases its usability and durability.
Roof replacement. The replacement of a building roof is considered a major repair if it allows the building to be used beyond its normal operating life.

Accounting for Major Repairs

In accounting, major repairs are capitalized as assets and depreciated over time. They are recorded as separate assets from the structures on which the work was done, which makes it easier to trace and capitalize the expenditures associated with specific repairs.

Minor repairs do not extend the useful life of an asset, and so are charged to expense as incurred. Given this difference in treatment, it is critical to properly define what constitutes a major and minor repair, and consistently apply this definition in all cases.