What is required for an improvement to qualify for capitalization?

For an improvement to qualify for capitalization, it is essential that it extends a capital asset's expected useful life. Capitalization refers to recording an expense as a long-term asset on the balance sheet instead of as an immediate expense on the income statement. This is appropriate for costs that significantly enhance the value, utility, or lifespan of the asset.

When an improvement prolongs the asset's useful life, it indicates that the asset will provide benefits to the entity over a longer period, justifying the capitalization of the expenditure. This practice aligns with the matching principle in accounting, where costs are matched with the revenues they help to generate over time.

The other choices involve aspects that, while they may contribute to an asset’s overall value, do not meet the strict criteria for capitalization under accounting standards. Enhancing aesthetic appeal, increasing market value, or reducing operating costs are significant considerations in asset valuation, but they do not directly relate to extending the asset's useful life, which is the key factor for capitalizing improvements.