Final answer:
A company might choose not to capitalize a long-lived asset if its cost is below a preset threshold determined by the company's capitalization policy. Capital includes both physical objects and intellectual property if they satisfy two specific criteria: generating future benefits and having a useful life beyond the current period.
Step-by-step explanation:
A company may make an exception to the accounting rules and not capitalize a long-lived asset if its cost is below a certain threshold, known as the capitalization limit or capitalization policy. This practice is typically governed by a company’s internal policies, which may determine that small expenditures are unlikely to significantly affect financial statements or operational efficiency, and therefore, can be expensed immediately rather than capitalized.
Capital does not consist solely of physical objects; it may also include intellectual discoveries, such as the score for a new symphony or computer software used by businesses to produce goods and services. An asset is considered capital if it meets two criteria: the asset must be used to produce future benefits, and it must have a useful life beyond the current accounting period.