Editing Capital asset (section)

==Specific common definitions==

*In [[financial economics]], a distinction is made between [[capital (economics)|capital]] and other assets. Capital refers to any [[asset]] used to make money as opposed to other assets used purely for personal enjoyment or consumption. The goal of the distinction is to ensure personal taste does not play a role in valuation of capital. However, differences of opinion still are possible based on how much money the asset will produce. With the further assumption that people agree on the probability distribution of future cash flows, it is possible to have an objective [[capital asset pricing model]]. Even without the assumption of an agreement, it is possible to set rational limits on capital asset value.<ref name="Fama">Eugene F. Fama and Merton H. Miller, ''The Theory of Finance'', Holt Rinehart and Winston (1974).</ref><ref>{{cite web |title=Asset Management and Asset Valuation: The Implications of the Government Accounting Standards Bureau (GASB) Standards for Reporting Capital Assets |url=https://www.researchgate.net/publication/237447834}}</ref>
*For United States Federal government accounting, capital assets have been defined including land (including parklands), structures, equipment (including motor and aircraft fleets), and [[intellectual property]] (including software), that have an estimated useful life (also known as [[service life]]) of two years or more. Capital assets exclude items acquired for resale in the ordinary course of operations or held for the purpose of physical consumption such as operating materials and supplies.<ref name="OMBA-II">Office of Management and Budget (OMB) Circular A–11: Planning, Budgeting, and Acquisition of Capital Assets, Supplement-Capital Programming Guide.(2-14) Accessed at [https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/a11_current_year/capital_programming_guide.pdf]</ref> 
**The cost of a capital asset is its full [[life-cycle cost]], including all [[Direct costs|direct]] and [[indirect costs]] associated with the [[Capital budgeting|planning]], [[Infrastructure and economics#Engineering|engineering]], procurement including [[construction]] (purchase price and all other costs incurred to bring it to a form and location suitable for its intended use), operations and maintenance (including service contracts), and disposal.<ref name="OMBA-II"/> 
**Capital assets may be acquired in different ways: through purchase, construction, or manufacture; through a lease-purchase or other [[capital lease]], regardless of whether the title has passed to the Federal Government; through an [[operating lease]] for an asset with an estimated useful life of two years or more; or through an exchange. Capital assets include the [[environmental remediation]] of land to make it useful, leasehold improvements and land rights; assets owned by the Federal Government but located in a foreign country or held by others (such as Federal contractors, State and local governments, or colleges and universities); and assets whose ownership is shared by the Federal Government with other entities.<ref name="OMBA-II"/> 
**Capital assets include not only the assets as initially acquired but also additions, improvements, modifications, replacements, rearrangements and reinstallations, and major improvements (but not ordinary repairs and maintenance).<ref name="OMBA-II"/> 
*For State or Local governmental accounting in the United States with reference to [[public capital]] or [[infrastructure]] a capital asset is defined as any asset used in operations with an initial useful life extending beyond one reporting period.<ref name="GASB">Governmental Accounting Standards Board Statement No. 34, ''Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments'', paragraph 19.</ref> Generally, government managers have a "stewardship" duty to maintain capital assets under their control.  ''See [[International Public Sector Accounting Standards]] for details.  See [[Triple bottom line]] for widely used public sector accounting methods in which [[natural capital]] and [[social capital]] are characterized not as [[intangible asset|intangibles]] or [[externalities]] but as actual capital assets.''
*In some income tax systems (for example, in the United States), gains and losses from capital assets [[Capital gains tax|are treated differently than other income]]. Sale of non-capital assets, such as inventory or stock of goods held for sale, generally is taxed in the same manner as other income.  Capital assets generally include those assets outside the daily scope of business operations, such as investment or personal assets.  The United States system defines a capital asset by exclusion.<ref>[https://www.law.cornell.edu/uscode/text/26/1221- 26 USC 1221].  ''Also see the discussion of capital gains and losses in [https://www.irs.gov/publications/p550/ch04.html#en_US_publink100010476 IRS Publication 550].''</ref>  Capital assets include all assets ''except''  inventory of supplies or property held for sale (including subdivided real estate), [[Depreciation|depreciable]] property used in a business, accounts or [[notes receivable]], certain commodities derivatives and hedging items, and certain copyrights and similar property held by the creator of the property.  The United Kingdom has an even broader definition.<ref>See HMRC discussion of [http://www.hmrc.gov.uk/cgt/intro/when-to-pay.htm assets liable to capital gains tax].</ref>