Room refurbishment: asset or repair?

How a hotel decides which refurbishment costs go on the fixed-asset register and which are repairs, and how to record the contractor's bills to match.

By Achekam · 11 October 2026 · 5 min read · For Hospitality businesses in South Africa, Nigeria, Kenya

A hotel closes a floor for six weeks. When it reopens, the rooms have new beds, new carpets, fresh paint, rewired lighting, a minibar in every room and, in two of them, a bathroom where a storeroom used to be. The contractor's final account arrives as one long invoice, and the bookkeeper has to decide where each line goes.

Get it wrong one way and the month of the refurbishment shows a large loss, while the balance sheet understates what the hotel owns. Get it wrong the other way and repairs sit on the balance sheet for years, depreciating quietly, while the income statement looks better than it should. This article sets out a practical test and shows how to record the result in Achekam, for hotels, lodges and guesthouses in South Africa, Nigeria and Kenya.

Improvement or upkeep: the test

The question to ask of every cost is whether it creates something the hotel will use for more than a year, or keeps what already exists in working order.

• Upkeep is a repair. Repainting a room, regrouting tiles, fixing a leaking shower, servicing the air-conditioning, replacing a broken handle. The room is restored to the condition it was in; it is not made into something new. These go to the income statement in the month they happen.
• Improvement is an asset. A new bathroom built into a storeroom, a lift installed where there was none, a solar installation, new air-conditioning units in rooms that had fans. The hotel owns something it did not own before, which earns its keep over several years. These go on the fixed-asset register and are depreciated.

The grey area is replacement. New beds to replace old beds are usually assets, because each bed lasts years. A single replacement light fitting is usually a repair. Many hotels settle the grey area with a written policy agreed with their accountant: items below a set cost are expensed, items above it are capitalised, and like-for-like replacements of whole room sets are treated as assets.

The IFRS Foundation's summary of IAS 16 Property, Plant and Equipment explains the principles for recognising such items, measuring their carrying amount and working out depreciation, and is the standard your accountant will apply.

Furniture, fittings and equipment

Hotels usually group refurbishment assets into a few classes, often called FF&E:

Each class needs its own asset account in the chart, and each will have its own depreciation period. Each business has its own chart of accounts, created when the books first open, and accounts can be added, renamed or switched off, so set up the classes you need before the contractor's invoices start arriving.

Capturing supplier bills to the right account

A refurbishment invoice that mixes everything is the bookkeeper's problem. Ask the contractor, before work starts, to invoice in sections that match your classes: furniture, equipment, building work and finishes. Many will, if asked early.

In Achekam, a business records supplier bills line by line with VAT, so one bill can carry several lines, each posted to its own account. A bill without a purchase order waits for approval before it posts, which gives the owner or general manager a natural moment to check the split before it reaches the ledger. The bill can be paid in full or in parts, which suits a contractor paid in stages.

South African hotels set each bill line to 15% or 0% VAT, and bills post input VAT to the ledger. Nigerian and Kenyan hotels should take care: supplier bills do not yet use the country's own VAT rate, offering 15% or 0% and defaulting to 15%. Check the VAT on every line and agree with your accountant how input VAT is recorded until bills follow your country's rate.

Adding assets and depreciating them

Once the bills are posted, add the assets to the register. A fixed-asset register lets a business add assets at cost, depreciate them monthly by straight line or reducing balance with a journal each month, and dispose of them with the profit or loss posted.

Decide how detailed to be. One asset per bed is precise and laborious; one asset per floor's furniture is quicker but makes later disposals harder. A common compromise is one asset per class per refurbishment phase, for example "Third floor furniture" and "Third floor air-conditioning".

Each month, check that the register agrees with the ledger. The general ledger lists every posted line, so the cost recorded in each asset account can be compared with the register's total for that class. Tax is a separate matter: the register does not work out tax wear-and-tear or capital allowances, so give your tax adviser the asset list at year end.

Replacing items before they are fully depreciated

Refurbishments often replace things that still have a value in the books. The old beds were bought some years ago and are not yet fully depreciated; now they have gone to staff or a charity, or into a skip.

Record the disposal in the register. The asset comes off the books, and any remaining value is posted as a loss on disposal (or a profit, if the old items were sold for more than their book value). Skipping this step leaves the old beds depreciating beside the new ones, and the register no longer matches what is in the rooms.

After the month closes, run the management accounts. The income statement for the refurbishment month, beside the month before, should show repairs that look sensible and a loss on disposal you can explain; the balance sheet should show the new assets. Equipment-heavy businesses face the same choices in different words, as depreciation for a transport fleet shows, and choosing a depreciation method for medical equipment covers how the method and useful life are picked.

Before the next refurbishment

Write the capitalisation policy down, add the asset classes to the chart, and give the contractor your invoicing sections before the first room is stripped. The bookkeeping then follows the building work instead of chasing it.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.