When looking at a large industrial warehouse there is little doubt that it is a fixed asset of the business, but not all decisions are this clear cut.

Materiality: Businesses will often purchase numerous small assets that are not for resale. These could include tools, pallets and desk stationery such as hole punches. The monetary amounts are not material to the financial statements and to avoid creating unnecessary accounting complications they are expensed directly against profit.

Established practice: Some industries have established practices that although not in line with expectations have become the norm. If such practice is used consistently between accounting periods it has a minimal distorting impact on the figures.

Future benefits: These may not always be clear and hence divergent opinions arise over the treatment of the associated item. A good example would be environmental and safety equipment not specifically required by law. The purchaser may get a future benefit in terms of enhanced reputation but this is difficult to quantify.

Hopefully you have already spotted what will become a recurrent theme associated with many areas of accounting practice. There are...