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4.3 PP&E upgrades
Once the PP&E is depreciated NO further cost may be capitalized unless the specific cost and
related activity actually:
1. Changes the original intended use as documented in the original CR (use is the actual
function, process or output) of PP&E, and
2. Brings an additional net economic benefit, in excess of the original total benefits in the
original CR.This net benefit can NOT include any benefit from a prolonged physical use
or a change in production location over the original CR, and
3. These changes are clearly demonstrated and documented, (as opposed to verbal
opinions)
Then the costs must be capitalized and the new total book value should be depreciated over
the remaining life of the original PP&E. If the capitalized costs aresubstantial to the original
cost of the PP&E, the remaining life may be extended. (The economic life is not the physical
life).
For those post capitalizations, the definition of the remaining useful life may be simplified as
follows. Since the main asset is already in use for several years the useful life of the post
capitalization must be adjusted and generally set individually depending on theremaining
useful life of the main asset:
• The remaining useful life of the main PP&E is more than 50 % of the original useful life:
The post capitalization gets the same remaining useful life as the main asset.
Example: Starting useful life of a machine 10 years, after 2 years a post capitalization is made.
The post capitalization gets a useful life of 8 years.
• The remaining useful life of themain PP&E is less than 50 % of starting useful life:
Rule is that the post capitalization must be assessed individually for its useful life. In general
this useful life is 50% of the original useful life of the main asset. If the assessed useful life
deviates significantly from this general rule, upfront approval by Corporate Accounting and
Invest Controlling Hanover is required.
Example:Starting useful life of a machine 10 years, after 9 years a post capitalization is made.
The post capitalization gets a useful life of 5 years.
The post capitalization must be accounted for in the asset subledger as a sub/component of
the main asset. The rule for HB I and taxes can differ due to legal requirements.
Only the exact costs which fulfil ALL 3 criteria above shall be capitalized. Thismay be
less than the amounts shown on the purchase order or new CR. All other costs, regardless of
the amount involved, must be expensed. Therefore all cost which only maintains, continues or
restores the original function, use or output of previously capitalized PP&E, already in service,
must be expensed.
Costs for dismantling, transporting and re-installing PP&E from one plant location toanother
4 Other Accounting Information
Continental FRM Part 1 Page 394 of 549 Edition 1 2008
plant location of a Continental group company, even cross-border must ALWAYS be expensed
for HB II purposes.
This policy covers subsequent cost for already capitalized PP&E including
• Normal cleaning and maintenance
• Repairs
• Replacement of parts
• Completion in phases, where each separatephase can be put in service
• Expansion of the PP&E at a later date beyond the original intended use
• Betterments or improvements
• Upgrades, renovations, overhauls, retrofits or refurbishments
• Rearrangements or conversions



















Ejemplos que solo califican como gasto y no pueden capitalizarse

Ejemplos de actividades que solo mantienen, continúan orestablecen el uso original, como por ejemplo, su uso o salida de la PP&E ya capitalizado previamente, ya en servicio, y debe ser considerado como gastos:

1. Si la actividad y el costo solamente prolonga o aumenta la vida útil de un PP&E. Por ejemplo, una máquina que tenga una vida útil de 15 años, dándole su mantenimiento preventivo. Después de 15 años, numerosas partes principales de la máquina, pero...