Cost of Painting New Vehicle

by Gilly

Expensing vs Capitalization

Expensing vs Capitalization

Hi Madam,

I work for an operational lease company. The company bought 5 brand new vehicles. Those 5 vehicles were painted as per customer request (the customer is a courier company). They are leased for a period of 3 years to that customer.

Question - how do I treat the cost of painting? As an expense or do I need to capitalized it?

The painting cost is about 8% of vehicle cost. I expensed it as a sales and marketing expense because it is not a recurring expense. Sometimes regular maintenance and service espenses become more than 9% of the vehicle cost over regular intervals.

Considering this and general capitalization rules, I decided to expense it. Please advise me how to treat it?

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