What Is a Capitalized Lease Method? The capitalized lease method is an accounting approach that posts a company’s lease obligation as an asset on the balance sheet. If the lease agreement meets at least one of the four criteria provided by the Financial Accounting Standards Board (FASB), the lease is capitalized, which means that the
What Is a Capital Loss? A capital loss is the loss incurred when a capital asset, such as an investment or real estate, decreases in value. This loss is not realized until the asset is sold for a price that is lower than the original purchase price. Key Takeaways A capital loss is a loss
What Is a Capital Loss Carryover? Capital loss carryover is the net amount of capital losses eligible to be carried forward into future tax years. Net capital losses (the amount that total capital losses exceed total capital gains) can only be deducted up to a maximum of $3,000 in a tax year. Net capital losses
What Is Capital Maintenance? Capital maintenance, also known as capital recovery, is an accounting concept based on the principle that a company’s income should only be recognized after it has fully recovered its costs or its capital has been maintained. A company achieves capital maintenance when the amount of its capital at the end of a
What Is a Capital Note? A capital note is short-term unsecured debt generally issued by a company to pay short-term liabilities. Capital notes carry more risk than other types of secured corporate debt, because capital note holders have the lowest priority. Key Takeaways A capital note is a type of unsecured debt a company might
What is Capital Outflow? Capital outflow is the movement of assets out of a country. Capital outflow is considered undesirable as it is often the result of political or economic instability. The flight of assets occurs when foreign and domestic investors sell off their holdings in a particular country because of perceived weakness in the nation’s economy
What Is a Capital Pool Company (CPC)? A capital pool company (CPC) is an alternative way for private companies in Canada to raise capital and go public. The capital pool company system was created and is currently regulated by the TMX Group, and the resulting companies trade on the TSX Venture Exchange in Toronto, Canada.
What Is a Capital Project? A capital project is a long-term, capital-intensive investment to build upon, add to, or improve a capital asset. Capital projects are defined by their large scale and large cost relative to other investments that involve less planning and resources. Key Takeaways A capital project is an often-pricey, long-term project to
What Is Capital Rationing? Capital rationing is the process through which companies decide how to allocate their capital among different projects, given that their resources are not limitless. The main goal is to maximize the return on their investment. Key Takeaways Capital rationing is a process that companies use to decide which investment opportunities make
What Is Capital Reduction? Capital reduction is the process of decreasing a company’s shareholder equity through share cancellations and share repurchases, also known as share buybacks. The reduction of capital is done by companies for numerous reasons, including increasing shareholder value and producing a more efficient capital structure. Key Takeaways A capital reduction is the
