What type of improvements should be capitalized for infrastructure assets?

Improvements to infrastructure assets should be capitalized when they enhance the functionality of the asset, meaning they not only maintain but also increase its value, extend its useful life, or adapt it to a different use. This includes upgrades that significantly enhance performance, such as replacing a worn-out bridge deck with a new one that has improved materials for better load capacity, or implementing advanced technology in transportation systems that makes them more efficient.

Capitalizing these types of improvements allows for better matching of costs with the revenues generated by the improved assets and reflects the overall condition and capability of the infrastructure. Conversely, routine repairs and maintenance, which do not enhance functionality or extend the asset’s life, are typically expensed as they do not meet the criteria for capitalization. This distinction ensures accurate financial reporting and reflects the economic reality of the asset's value over time.