Fixture definition
/What is a Fixture in Accounting?
A fixture is a fixed asset that is physically attached to property. A fixture cannot be removed without causing damage to the asset. Examples of fixtures are integrated lights, built-in cabinets, toilets, and sinks.
Characteristics of a Fixture
The key characteristics of a fixture are as follows:
Permanent attachment to property. A fixture is physically or functionally attached to a building, structure, or land and cannot be easily removed without causing damage to the property.
Classified as long-term asset. Fixtures are capitalized and recorded as long-term assets because they provide economic benefits over multiple accounting periods.
Depreciable asset. Fixtures are subject to depreciation, as they have a finite useful life. The depreciation method and period are determined based on the asset's nature and expected lifespan.
Enhances property value. Fixtures are considered to enhance the overall value of the property, making them an integral part of the real estate or infrastructure.
Ownership tied to property. A fixture is typically considered part of the real property in legal terms, meaning ownership of the fixture transfers with the sale of the property unless explicitly excluded in the agreement.
Recorded at historical cost. Fixtures are recorded on the balance sheet at their historical cost, which includes the purchase price, installation costs, and any related expenses required to bring them to their intended use.
Accounting for Fixtures
If a fixture costs more than the capitalization limit set by a business, then it is recorded as a fixed asset, and is depreciated over its useful life. If the fixture costs less than the capitalization limit, then it is charged to expense as incurred.