Modern accounting is a science focused on providing useful, transparent, and comparable information that supports strategic decision-making. Within this universe, the capitalization of fixed assets plays a central role. This procedure, which is often handled in a technical and even bureaucratic manner, has direct implications for how companies present their results, structure their balance sheets, and convey credibility to the market.

The topic gained even more relevance with the adoption of international accounting standards in Brazil, requiring companies of all sizes to be clear about which costs should and should not be capitalized.

In this article, you'll gain an in-depth understanding of how capitalization works, which expenses can be incorporated into an asset's value, which should be treated as expenses, and the financial, fiscal, and strategic impacts this process has on day-to-day corporate operations.

What does capitalization of fixed assets mean?

Capitalizing a fixed asset means recording on the balance sheet not only the purchase price of an asset, but also all additional costs necessary to prepare it for use and generate future economic benefits. Instead of recognizing these costs immediately as expenses, the company adds them to the asset's value, distributing their impact on the bottom line through depreciation over its useful life.

In practice , capitalization works as a temporal equilibrium mechanism. If a company purchases a machine for one million reais and needs to spend another one hundred and fifty thousand on transportation, installation, and technical fees, the total value of the asset will be one million, one hundred and fifty thousand. This amount will be depreciated year after year, gradually reflecting the cost of the investment. This prevents the accounting result from being distorted in a specific period, and the financial statements become more consistent.

Costs that can be capitalized

One of the most sensitive points in applying the concept is identifying which costs should be capitalized and which should be recognized as expenses. The purchase price of the asset is only the starting point.

Direct acquisition and installation costs: Additional expenses such as transportation, insurance, import taxes, civil works for installation and operational tests are also eligible for capitalization.

Technical services and financial charges: Fees paid to engineers, architects, or consultants involved in the asset's implementation are included in the capitalized value. This also includes financial charges on loans taken out specifically to enable the acquisition or construction of the asset.

What cannot be capitalized: Expenses of an operational or administrative nature, such as personnel training, preventive maintenance or operational losses during the initial phase of operation, are treated as immediate expenses.

Financial and strategic impacts

The way expenses are handled directly affects performance indicators. When a cost is capitalized, it increases the asset's value and is gradually allocated. This softens the impact on profit and improves the stability of results.

Impact on performance indicators: EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) and ROA (Return on Assets) are indicators that can be impacted. By capitalizing certain expenses, the company avoids artificial reductions in its EBITDA and ensures that assets are correctly measured for a more realistic view of its performance.

Strategic management tool: From a strategic perspective, capitalization also serves as a management tool. By properly measuring its assets, the company can better evaluate investment decisions, comparing acquisition costs, useful life, and expected return.

Tax impacts

In addition to accounting implications, the capitalization of fixed assets has significant tax implications. When a cost is capitalized, it is recovered over time through depreciation, which directly impacts the calculation of taxable income.

Tax benefits and risks: Depreciation of higher-value assets can gradually reduce the tax base for Income Tax and Social Contribution on Net Income (CSLL). Thus, capitalization also serves as a tax planning tool. However, caution is needed: attempts to artificially inflate the value of assets may result in tax assessments and fines.

Brazil x IFRS: similarities and differences

With the accounting convergence promoted by the CPC, Brazilian practice has become much closer to the international IFRS standard. Both CPC 27 and IAS 16 establish similar criteria for capitalization. Both require that costs be directly related to the acquisition or construction of the asset and that they generate future economic benefits.

Practical case studies

To understand real-world application, it's helpful to look at examples from different industries.

In industry and infrastructure: In infrastructure, energy, and heavy construction projects, engineering, earthmoving, equipment assembly, and loan financial charges are capitalized. The recorded value reflects all the infrastructure required for the operation, not just the installed equipment.

In technology companies: In technology companies, the concept applies to assets such as servers, data center equipment, and network infrastructure. Expenses for training development teams or launch campaigns, however, are treated as immediate expenses.

Relationship between capitalization and depreciation

Capitalization cannot be viewed in isolation. Once an asset is recorded on the balance sheet, it is depreciated over its useful life. Depreciation is the mechanism that distributes the asset's value into periodic installments, reflecting physical wear and tear and economic consumption. This process ensures that costs are recognized in line with the benefits the asset generates.

Good practices for asset capitalization

Correctly applying capitalization requires more than technical knowledge. It also requires adopting good management practices.

Documentation and internal policies: Maintaining robust documentation (invoices, contracts, and reports) that proves the link between each expense and asset is the first rule. Another recommendation is to establish clear internal accounting policies, defining objective criteria for capitalization.

Use of technology and external support: Using ERP software simplifies depreciation tracking. Furthermore, ongoing dialogue with external auditors and specialized consultants ensures that practices comply with regulations.

Capitalization as an ally of strategic management

Capitalizing fixed assets is much more than a technical accounting requirement. It's a practice that ensures transparency, predictability, and compliance, while also providing strategic support for asset management.

When applied correctly, capitalization prevents distortions in results, improves performance indicators, and strengthens the company's credibility. Mastering the management of corporate depreciation rates is synonymous with solidity, transparency, and a long-term strategic vision.