What are the three criteria for classification as general PP&E?

What are the three criteria for classification as general PP&E?

• A. Two or more years expected life; Not intended for resale; Intended for use by the procuring entity
• B. One year expected life; Not intended for resale; Intended for use by the procuring entity
• C. Two or more years expected life; Intended for resale; Intended for use by the procuring entity
• D. Two or more years expected life; Not intended for resale; Intended for use by the entity procuring

Answer: (A)

General PP&E are long-term, tangible assets used in ongoing operations, not held for resale. The three criteria ensure an asset is capitalized as general PP&E: it has a useful life of two or more years, it is not intended for resale (so it isn’t inventory or a asset held for sale), and it is intended for use by the entity that procured it to support its operations. If an asset lasts only one year or less, it wouldn’t be classified as general PP&E; if it’s intended for resale, it’s not PP&E but inventory; and if it’s intended for use by someone else or for investment rather than the procuring entity’s operations, it doesn’t fit.

General PP&E are long-term, tangible assets used in ongoing operations, not held for resale. The three criteria ensure an asset is capitalized as general PP&E: it has a useful life of two or more years, it is not intended for resale (so it isn’t inventory or a asset held for sale), and it is intended for use by the entity that procured it to support its operations. If an asset lasts only one year or less, it wouldn’t be classified as general PP&E; if it’s intended for resale, it’s not PP&E but inventory; and if it’s intended for use by someone else or for investment rather than the procuring entity’s operations, it doesn’t fit.