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Capital Asset Accounting - General Procedures

General Information

Statement of Procedures

All equipment acquired or controlled by the University will be subject to the General Property Accounting Procedures.  In addition to the General Property Accounting Procedures, the Property Accounting Procedures - Government Property will apply to all Government property controlled by the University.

This procedure provides guidance and direction for the handling of Purdue University, Federal and State owned capital equipment, including but not limited to, acquisitions, ownership, transfers, relocations, and/or disposals of equipment, and the responsibilities and duties of Property Accounting pertaining to the tagging and documentation of each piece of capital equipment.   Any person who is in a position of purchasing, fabricating, transferring, using and/or disposing of a piece of movable capital equipment within Purdue University, including regional campus is affected by this policy.   

Responsibilities

Property Accounting Responsibility

The Property Accounting department is responsible for the accounting control, records, operations, and reporting for all moveable capital equipment. The Plant, Auxiliary, and Agency Fund Accountant is responsible for the accounting control, records, operations, and reporting for fixed assets. The disposal of equipment acquired through the University by purchase, lease, donation, loan, etc. is controlled by the University.   All disposals must have prior approval from Property Accounting and additional approvals may be needed depending on the funding source; for example equipment purchased on a grant requires the approval of Sponsored Program Services (SPS).

Property Accounting will record the following information in the Asset Module for moveable equipment and capitalized software:

  • Description of the asset including manufacturer and model name/number, serial number, inventory number, responsible person/department, original value, depreciation information, dates of acquisition, capitalization and deactivation, Fund, Orders and Cost Center numbers.
  • All records will also include transfers of ownership, location changes, inventory cycle data, disposals of assets via SAP, and inventory reconciliations
  • Forms received from departments: ECS – Equipment Change Status, POC – Property off campus will be tracked by spreadsheet and notes made in SAP.  

The Plant, Auxiliary, and Agency Fund Accountant is responsible for the accounting control, records, operations, and reporting for all fixed assets.

Custodial Responsibility

The head of each department is responsible for all assets procured by, or in conjunction with, his/her department to which the University has made assignment. This responsibility includes protection against abuse, theft, movement, disposal, or unauthorized use. An inventory of capitalized moveable equipment is performed and maintained by Property Accounting with departmental cooperation. Accurate inventory records are necessary for insurance purposes, maximum equipment utilization, and planning for replacement through historical data.   

Contacts                                        

Moveable Capital Equipment

Subject  Contact Telephone E-mail/Web Address
Policy Clarification Property Accounting Manager 765 49-47376 propacct@purdue.edu
Equipment Change in Status (ECS) Inventory Inspector 765 49-47375 propacct@purdue.edu
Property Off Campus (POC) Forms Inventory Inspector 765-49-47377 propacct@purdue.edu
Change of Asset Funding Source Form (CAF) Property Accounting Manager 765 49-47376 propacct@purdue.edu
Inventory, Tagging new equipment Inventory Inspector 765 49-47375,
765 49-47377
propacct@purdue.edu
Equipment Lists - Purchases Property Accounting Manager 765 49-47376 propacct@purdue.edu
 

Fixed Capital Equipment

Subject  Contact Telephone E-mail/Web Address
Fixed Assets – Buildings, Land, Infrastructure Plant Aux and Agency Fund Accountant 765-49-47373  

Definitions

Acquisitions

Equipment may be acquired by purchase, gift, loan, transfers between departments or campuses within the university or from another institution, or Government surplus program.

Advertising – Equipment for sale

A piece of equipment that is in good or fair condition must be advertised for sale or transfer within the University for 14 days on the Advertising website.  https://www.purdue.edu/surplus   

Change of Asset Funding Source (CAF) Form

Change of Asset Funding Source Form (CAF) is used to notify Property Accounting of funding source being changed.  This is in place of a JV.  

Cost

Cost is defined as the total cash amount paid for the equipment plus the trade-in value, if any, of equipment given in exchange. For simplicity purposes, trade-in value is assumed to be the book value (cost less accumulated depreciation) of equipment traded. Included in cost are all charges incurred in readying the equipment for its intended use (e.g., freight and installation charges). Discounts, if any, are excluded from cost. For donated items, cost is defined as the fair market value at the date of donation, plus costs incurred to ready the equipment for its intended use, but not including shipping charges. Fabricated equipment includes the total of all supplies and expense (S&E) costs, including drawings, blueprints, component parts, materials, supplies consumed in fabrication, and installation.

Equipment Change in Status (ECS) Form

Equipment Change in Status (ECS) Form is used to notify Property Accounting of pertinent information for each piece of equipment; including but not limited to the transfer, disposal of, change in location/building/room number, and/or equipment reported lost or stolen.

Fabricated Equipment

Fabricated Equipment is a new piece of equipment built or assembled from individual parts, by a PI or other approved Purdue University personnel.  It must be determined prior to the acquisition of parts or service that these charges will be related to a fabrication so correct approvals are completed.  If the piece of fabrication equipment meets capitalization criteria, its total cost will be recorded as capital.  (See additional information on fabricated equipment in the Miscellaneous Property Procedures section)

Gifts

A Gift is a contribution of goods or services given that can be used to advance the mission of Purdue University. Gifts having a value more than $5,000 are to be capitalized.  These must include an itemized inventory list, an invoice or letter from the vendor/donor, or published information on the value of the item(s).  For all other gifts that are valued at $500,000 or over and that are not considered capital gifts, a journal voucher is prepared to record their value. Gifts in kind must be held by the university more than 3 years to be eligible for disposal by sale or exchange.  An ECS form must be completed by the department to complete this action and forwarded to Property Accounting. 

Object Class

A six digit number SAP uses to categorize the type of equipment.

Asset Object Classes

154110 Land
154120 Land Improvements
154130 Infrastructure
154140 Buildings
154150 Assets Under Construction
154510 Operating Software
154520 Administrative Software
154530 Furniture
154540 Office Machines
154550 Scientific/Lab Equipment
154560 Computer Equipment
154570 Shop Equipment
154580 Automotive
154590 Agricultural
154600 AV/Photo Equipment
154610 Firearms
154620 Other Equipment

Property Off Campus (POC) Form

Property Off Campus (POC) Form is used to notify Property Accounting of the location and responsible person for capital moveable equipment that has been taken off campus for University business and when it has been returned.  A copy of this form is retained in Property Accountings office.

Purchases

Purchases of equipment are completed through the SRM system by way of shopping cart.  This shopping cart follows an approval path before the actual purchase is made at which time Property Accounting can determine if the equipment is capital or not.   

Tagging of Equipment

A ‘Property of Purdue University’ identification tag/sticker will be placed on all tangible capital assets upon purchasing.  Each tag has a specific number which ties to an asset number in SAP that contains all documentation of the equipments specific information.  Government owned property will also receive an ‘Owned by US Government’ tag to show its specific ownership.

Trade in Value

Trade-in value is to be the book value (original cost less all accumulated depreciation) of equipment traded. 

Verification of Equipment Non-Availability

The Verification of Equipment Non-Availability form is completed for scientific, computer and shop equipment, purchased with Federal funds, costing more than $25,000 for which the screening process is negative. Once signed, this form is attached to the Shopping Cart in the SRM system.  This certifies that the equipment being purchased is not already available for use, or if available is not suitable or accessible on campus resulting in the need for the purchase.

Life Cycle of a Movable Capital Asset

Shopping Cart

  • Before equipment is purchased, a shopping cart is set up for the requested item(s) in SRM
  • An Equipment Verification form is required for all lab equipment, purchased with Federal funds, costing more than $25,000.  This form is to verify that this piece of equipment is not already owned by the University and/or is not available to be used by this project.
  • The shopping cart is routed for approvals
    • Property Accounting is always the last approver  for shopping carts with these criteria: more than $2,500 and with a certain set of commodity codes  (Capital limit was increased to $5,000, however we do still check shopping carts $2,500 and up)
  • Once all approvals are received, the PO is sent out for purchasing.

Receiving

  • Equipment is physically received in MMDC, who delivers it to the ordering department.
  • The business office staff marks the items as received in the SRM system
  • Every morning Property Accounting runs a ‘Received’ list from SAP which shows all the capital equipment that was received in the system the prior day.
    • This lets the Inspectors know that the equipment is here and ready for tagging.

Tagging

  • Property Accounting Inspectors contacts the contact person/end user to set an appointment for physically tagging the equipment
  • At this time a ‘Property of Purdue University’ numbered tag is secured to the equipment.  This is the inventory number for this item.  If the item is Federally owned, a Property of US Government tag is also added to the equipment.  
  • Any needed identifying information is also obtained to update the asset record in SAP including; serial number, manufacturer, location, contact name, etc.

Inventory

Purdue’s Inventory cycle runs over a 2 year period and is conducted by building. 

  • The information for all assets coded for a particular building are loaded into a scanner.
  • This scanner is then taken out by the Inspector to the building where each asset is located and the inventory tag is scanned.  The first round of scanned is referred to as ‘First Pass’
  • For any assets that were not found during First Pass, the Inspectors contact the contact person to assist with the location of the equipment.  This period is referred to as ‘Second Pass’
  • Once Second Pass has been completed, any assets that could not be found are reported on the Inventory Recon which is sent to the department for further explanations. 

Disposal

At the time that a department no longer needs a piece of equipment and/or it is no longer useable, the Universities disposal process is to be followed.

  • If the department no longer needs the equipment however it is in good to fair condition, an ad is placed on the Warehouse Advertising website for 14 days.  This website is only for Purdue employees to purchase items for Purdue use. www.purdue.edu/surplus
    • If purchased from the ad, the equipment asset is transferred to the new department; the asset record is updated with the new information and continues in the inventory cycle.
    • If the equipment is not purchased, the disposal process is continued.
  • If the equipment is no longer useable or is not purchased through the advertising website
    • An ECS (Equipment Change Status) form is completed and sent to Property Accounting.
    • Property Accounting verifies and approves the ECS form, updates the asset record in SAP then forwards the form to the Warehouse.
  • After receiving the ECS form, the Warehouse staff contacts the department to determine the equipment delivery/pickup method of the equipment to the warehouse in preparation for resale/recycle/disposal.  At this time the equipment is moved to the WHSE location in the asset system.
  • The Warehouse logs when the equipment is sold, recycled or disposed.  At the end of every month the log is sent to Property Accounting to dispose of assets, which dispose of assets, which writes off value.
    • When a piece of equipment is send to the Warehouse to be sold to the public, the transfer of any funds received from the sale is processed via JV by the Warehouse.  Questions concerning the amount and/or transfer should be addresses to the Warehouse. 

Tagging of Equipment

All tangible capital equipment will be identified as "Property of Purdue University" and will be marked with a tag/sticker with a barcode and number to facilitate physical inventory. Certain items may not be tagged due to their nature. Examples include (but are not limited to): certain works of art, livestock, and library books.

Property Accounting maintains a supply of tags without barcodes that departments may request for non-capital equipment. The tags are labeled "Property of Purdue University" and are available upon request.

Inventory Number

Tag Category Description

02xxxxx Equipment on loan – No tag
03xxxxx Special items that cannot be tagged – (ex. but not limited to) sensitive items, vehicles, physical size, location, etc.
05xxxxx Tagged – (older equipment)
06xxxxx Tagged – (older equipment)
07xxxxx Tagged – (older equipment)
08xxxxx Tagged – (older equipment)
09xxxxx Internal Betterments
1xxxxxx Tagged – (newest equipment)

All Government owned equipment will also have a special tag showing ownership of the item.  This is a simple white tag that states “Owned by US Government”.
All State owned equipment will need to follow grant specifications and Business Staff will need to work with SPS on any special requirements for this equipment.  

Physical Inventory

Physical Inventory of Equipment

The Property Accounting team will complete a physical inventory of the West Lafayette campus, farms, agricultural centers, and statewide technology sites every two years.  Inventories performed at the satellite campuses and Extension offices are handled jointly between sites.  Staff at the satellite campus/office conducts the physically inventory, then sends reports and documentation via email or campus mail to the Property Accounting Manager on the West Lafayette Campus for upload into the asset system.   This ensures that all assets are updated during the inventory process.

 Exceptions to the inventory procedure include library books and livestock. This two-year period is called an inventory cycle. Any individual department will be inventoried only once during a cycle. The inventory will consist of the following chronological steps:

  • The department will be notified via letter of the building to be inventoried and date inventory will begin.
  • The department will respond to Property Accounting by providing the name of a person within the department who can provide access/keys to all areas.
  • Property Accounting personnel will then conduct a physical inventory.
  • Property Accounting personnel will return to the department and try to locate items missed during the inventory.
  • Property Accounting will send the department a computerized listing attached to an ECS Form of equipment not located during the inventory. The department is responsible for locating the missing equipment and notifying Property Accounting of its location using the computerized listing.

Disposal or Transfer of Property

Disposal, Relocation, or Transfer of Equipment

All equipment purchased with University-controlled funds or received by gift is owned or controlled by Purdue University. Equipment may be disposed of or transferred only with the prior approval of Accounting Services in conjunction with Purchasing or SPS if the item was purchased with SPS-controlled funds.  Gifts in kinds can be disposed of only after it has been held by the university for 3 or more years.

A Property Accounting Form ECS (Equipment Change Status) is completed by the department for all University-owned equipment to be transferred, relocated, disposed of, or that has been reported as stolen or lost.

For Government-owned equipment in excess of need, SPS approval is required before the equipment can be disposed of and deleted from property records.
Availability of equipment surplus, when in good or fair conditions, must be advertised to departments within Purdue for a period no less than 14 days.  Departments may dispose of equipment as follows:

  • Send to the University warehouse for storage, cannibalization, or resale.
  • Cannibalize directly, using approved methods
  • Transfer to another University department.
  • Transfer to another institution. Before transferring Government-funded equipment, the University Contracting Group in SPS must be contacted. They will negotiate a transfer agreement. For all other equipment, Materials Management and Distribution must be contacted and they will make the necessary arrangements.

Transfer or Sale of Surplus Equipment

Internal sales should be handled as a transfer of accountability between departments. A Property Accounting ECS Form must be prepared by the department initiating the transfer and sent to Property Accounting for processing. Any exchange of funds will need to be carried out by completing a Change of Asset Funding Source (CAF) Form, using G/L 539850, Capital Recharge or Recovery, and attaching this form to the ECS Form.

If an internal customer is not identified within two weeks (14 days) of advertising, the department can send the ECS Form to Property Accounting to have the equipment transferred to the warehouse for sale or scrap. A contact person and phone number needs to be provided on the ECS form and a copy of the email advertising the surplus must also be attached. 

  • Student organizations are not considered to be University departments but are public and may only purchase items from the warehouse.

Please see Transfer procedures for specific instructions and examples.

Transfer to another Institution

Refer to SPS Departmental instructions on their website at:
http://www.purdue.edu/sps/pdf/Purdue_SPS_Handbook.pdf

Direct Outside Sales

Warehouse Operations is the only University department approved to sell property to the general public.  However, the following departments are allowed to conduct their own sales due to the type of equipment that is being sold at auctions or exclusive sales or due to the large quantity of items to be sold at one time.

  • The Farms – The selling of farm equipment at auctions specializing in this type of equipment.
  • Transportation Department – The Yearly Fleet Sale of University vehicles.
  • Housing and Food Services – Sale of dining or housing equipment and furniture.

A department may sell directly to an outside entity only after consulting with Property Accounting and receiving approval by the manager of Warehouse Operations.  Pertaining to all direct sales, Purdue Surplus is responsible for handling all moneys collected including the responsibility of making sure all sales tax is properly handled and recorded. 
Please see Sales procedures for specific instructions and examples.

Stolen Equipment

All stolen equipment must be reported immediately to the Purdue University Police Department upon discovery of the theft. Local police should be contacted for thefts occurring off campus. A Property Accounting ECS Form is then initiated by the department to update inventory records and is sent to Property Accounting. The equipment will be identified as having been stolen and will be removed from the inventory file.

Donations to Nonprofit Organizations

Periodically equipment may be identified which is sufficiently old or obsolete that it has virtually no value to the University. Such items, though possibly operable, may be essentially unsellable. When the priority options of transferring the equipment to other campus locations and the possibility of sale to an outside entity have been exhausted, department heads may be authorized by the Comptroller to donate the equipment to nonprofit organizations. The University does not provide warranties to the recipient organization for the donated equipment nor pay for shipping or installation costs. Requests should be made in writing and should include:

  • a statement that the equipment is in excess of the University needs and the basis for that determination
  • a statement that there is no possibility of sale to an outside entity and the basis for that determination
  • the name and nature (if not obvious) of the proposed receiving nonprofit organization
  • an indication of how or why that organization was selected
  • confirmation of unrestricted ownership by the department or by Sponsored Program Services if the original source of funds was a grant or contract
  • a completed Property Accounting ECS Form

The Comptroller, at the West Lafayette campus, is authorized to approve requests for equipment donations that meet the above criteria.  The Comptroller/Vice Chancellor for Business and Budget, at the regional campuses, are authorized to approve requests for equipment donations that have a current Net Book Value of less than $5,000.00.  If the NBV exceeds this amount, paperwork must be routed through the Comptroller at West Lafayette for approval. 

Organizations which meet the Internal Revenue Code Section 501(c)(3) requirements for Non Profit Organization will be able to receive donation of equipment from the University.  Individuals and those not meeting the Non Profit Organization requirements must purchase items from the warehouse.

Purchase or Handling of Particular Property

Lab, Computer and Shop Equipment Purchased with Federal Funds

Capital moveable equipment, within the class code range of 3000 to 5999, being acquired in whole or in part with Federal funds must complete an equipment screening.  This is a screening initiated by the principal investigator (PI), with the assistance of the department business administrator and Property Account to determine if suitable equipment is available from the Universities existing inventory.   

If after the screening process it appears that a suitable item may be available, the PI will contact the department having accountability for the item to determine if the item is available for use, is suitable to meet the project requirements and is reasonable accessible to the project. If after contacting the responsible department, the PI determines that the item of equipment is not available, is not suitable to meet requirements and/or is not reasonable accessible, the Verification of Equipment Non-Availability form will be completed and signed by the PI.

If the equipment is available for transfer or shared use, does meet the project's requirements, and is reasonably accessible, arrangements for the transfer or shared use of the equipment should be made with the department having responsibility for the equipment. The requisition should not be further processed. No further documentation is required unless the parties to the sharing arrangement or the transfer believe such documentation will be beneficial in setting forth the conditions of use. In the event the equipment is transferred from its present location, Property Accounting Form ECS should be completed.

Fabricated Equipment

If it is determined that a piece of fabrication equipment will be built or assembled from individual parts, by a PI or other approved Purdue University personnel, appropriate approvals will need to be received prior to initiating purchases.  These approvals will need to come from the department and SPS if purchasing through a grant, also notification will need to be sent to Property Accounting for asset documentation purposes.

As expenditures from purchase of supplies and materials, or the use of outside labor are incurred, they will be accounted for on GL 523120 Cap Fabrication S&E.  Salaries and wages of University employees are not capitalized.  Once this item is completed and its total cost meets the capitalization policy limit of $5,000, these pieces of fabricated equipment will be capitalized in one asset.

Note - that the use of GL 537300 will not remove associated facilities and administrative (F&A) costs.  Fabricated equipment is charge F&A costs in accordance with the University’s costing policies.  If after the item is completed it is not determined to meet the capitalization level, all expenditures will stay on GL 523120 Cap Fabrication S&E. 

If a piece of the fabricated equipment is purchased that meets the capitalization requirement, this is capitalized independently of the fabrication.  Once the fabricated piece of equipment is ready to be capitalized, the independent pieces object class (equipment code in SAP, see chart in definitions) will not be changed.  This item is left as originally charged and not capitalized as part of the fabricated item.  However, while no accounting entry is made for this separate piece of equipment, the JV should reference the item in the explanation section and documentation attached to show it as being used in this particular fabrication.

Please see Fabricated Equipment procedures for specific instructions and examples.

Gifts

Purdue University may accept contributions of goods or services that can be used to advance the mission of Purdue University. When accepting a tangible gift-in-kind or loan of a gift-in-kind, the recipient must complete a gift form, which is obtained in the University Development Office (UDO), and have it approved and signed by the recipient Department Head and Dean or Administrative Officer.  Appropriate backup documentation must attach to support description and valuation of the gift, and then send all documentation immediately to the UDO office for further approval by the Gift Funds Accountant and recorded in the University gift system (Advance CS). 

If the value exceeds $5,000 (individually or in the aggregate), and the donor is an individual, partnership, S corporation, closely held corporation, or personal service corporation, Internal Revenue Service Form 8283 (Non-cash Charitable Contributions) must be completed by the University for the donor. Development Services will arrange for processing of this form and will supply copies to the donor and to the receiving development office. This requirement does not apply if the donor is a publicly traded corporation.

Gifts-in-kind that are produced or manufactured by a corporation or a business making the contribution and that have a value more than $5,000 must include an itemized inventory list, an invoice or letter from the vendor/donor, or published information on the value of the item(s). 

UDO (University Development Office) forwards processed Gift in Kind Donations Form 41Bs with a value of $5,000 (effective July 1, 2009) and over to Property Accounting (PA).  Property Accounting assigns the assets to the capital gifts and keys into the accounting system into special g/l number 466850 – Gift-in-Kind.  All tangible capital equipment will be identified as "Property of Purdue University" and will be assigned a unique inventory number. Inventory inspectors will label equipment with a barcode and number to facilitate physical inventory. Certain items will not be tagged due to their nature. Examples include (but are not limited to): certain works of art, livestock, and library books.

For all other gifts that are valued at $500,000 over and that are not considered capital gifts, a journal voucher is prepared to record them.

Gifts in kind held by the university less than 3 years may not be disposed by sale or exchange.  However if after the 3 years, an item needs to be disposed of, as ECS form should be completed by the department and forwarded to Property Accounting.  If a tax form was attached to the original paperwork, Property Accounting will also advise Development Services.

Property off Campus – Insurance

All capital movable equipment removed from Purdue University for university business purposes must have a completed POC form on file in the Property Accounting office.  This form serves dual purposes for Property Accounting: 1. Establish staff permission(s) to take the equipment off campus, and 2. Informs Property Accounting of the new location so the asset record can be updated with the new information.

The POC form also meets the Federal Requirement in Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations Circular A-110 C34f(1vii) for equipment taken off campus. http://www.whitehouse.gov/omb/circulars/a110/a110.html#34

In the event that the equipment is stolen or vandalized, Risk Management would need to be contacted for further action and replacement processes.  http://www.purdue.edu/business/risk_mgmt/ 
Purdue’s insurance covers items within the United States and worldwide except for areas on the Hostile Countries list.  A list of these territories can be obtained under Building and Content Coverage on Risk Management’s website. http://www.purdue.edu/business/risk_mgmt/Risk_Management_Insurance_Program/index.html

All POC form’s are kept on file in the Property Accounting office and are good only until June 30th each fiscal year.  At the end of the fiscal year, renewal notices are sent out for Business Office review and renewal for the next year if necessary.  Once the equipment is returned an updated POC form reflecting the campus location should be returned to the Property Accounting office. 

Use of Equipment for Non-University Business

Under circumstances described in Business Office Memorandum No. 88 dated 20 April 1964, University equipment may be temporarily removed from campus or used on campus for non-university purposes. The following procedure must be used.

  • A memo from the department head requesting the preparation of a rental agreement should be forwarded to the University Contracting Group. The request should include the following information:
  • who is requesting use of equipment;
  • itemized description of the equipment, including manufacturer, inventory number and cost;
  • date the use will take place;
  • duration of use;
  • location of use (on or off campus);
  • labor cost if University employees operate the equipment;
  • utility requirements
  • suggested rental fee; and
  • if necessary a Conflict of Interest Disclosure
  • The University Contracting Group will review each request, make necessary revisions, establish a rental rate (in conjunction with the University Costing Office), and prepare a rental agreement. The agreement will then be forwarded to the prospective user for signature. Usage may begin only after the rental agreement has been fully executed.
  • The appropriate business manager will maintain all necessary use and location records. He/she will submit a billing through PSCD (Public Sector Collections and Disbursements) for collection of the rental fee. The credit for equipment rental fees will accrue to the University general funds. The Unrestricted and Restricted Funds Accountant in Accounting Services should be contacted regarding this transaction, if departments have questions.

Property Classes

A summary of property classes follows:

Property Class

Threshold

Useful Life

Comments

Moveable Equipment (including fabricated equipment) $5,000 More than one year Useful life will be assigned based on class
Library Books None N/A Expensed
Art and Artifacts None N/A Expensed
Livestock See below See below See below
Equipment Upgrades $5,000 Varies Must prolong useful life or extend functionality
Buildings $100,000 Varies  
Building Components $100,000 Varies  
Building Additions $100,000 Varies  
Building Renovations and/or Improvements $100,000 Varies  
Land N/A N/A Land is not depreciated
Land Improvements $100,000 Varies  
Infrastructure $100,000 Varies  
Leases $500,000   See specific guidelines
Intangible Assets (includes internally generated software) $500,000 Varies Intangible assets that have an indefinite useful life should not be amortized.

Moveable Equipment is defined as a tangible personal property item with a unit cost of at least $5,000, which has an expected useful life of more than one year, and which is not altered materially through use.

  • Fabricated Equipment is equipment that is built internally with parts purchased from outside vendor(s) and/or pieces already owned.  If any of the parts are more than the capitalization level of $5,000 that part will be capitalized and not charged an F&A rate, however all parts that don’t meet the requirement will be expensed and charged an F&A rate.  Once the piece of equipment is built, if its total value is over $5,000, the item is made into an asset, given an asset number and is tracked by Property Accounting like all other capitalized equipment. 
  • Library Books are expensed when purchased.  Inventories are kept by the various libraries.

Art and Artifacts University collections of fine art or artifacts will be expensed.

Firearms regardless of cost will be recorded in the Property Accounting System for tracking purposes.

Livestock:  The University's livestock is not tagged or physically inventoried by the Property Accounting department however the animals are capitalized at fair market value as of June 30 for financial reporting purposes only.

Intangible Assets with expenditures greater than $500,000 are capitalized.  Intangible assets lack physical substance, are nonfinancial in nature and their initial useful life extends beyond a single reporting period.  The useful life of an intangible asset should not exceed the contractual or legal period associated with it.  An intangible asset without a legal, contractual, regulatory or technological period does not have a useful life and as a result should not be amortized.  Assets that are acquired or created primarily for the purpose of obtaining income or profit are NOT capitalized.

  • Outlays related to the development of intangible assets should be capitalized if ALL of the following criteria are met:
  • The specific objective and nature of the service capacity that is expected to be provided has been determined.
  • The technical or technological feasibility for completing the project so that the asset will provide its expected service capacity has been demonstrated.
  • Demonstration of the current intention, ability, and presence of effort to complete or, in the case of a multiyear project, continue development of the asset.
  • Internally generated software is a common type of intangible asset. 
  • Software should be considered internally generated if it is developed in-house by the University's personnel or by a third-party contractor on behalf of the University.
  • Commercially available software that is purchased or licensed by the University and modified using more than minimal incremental effort before being put into operation also should be considered internally generated.
  • The generation of software must be beyond the preliminary project stage prior to capitalization.  The preliminary project stage includes activities that evaluate alternatives, determine the existence of needed technology, and select alternatives for the development of the software.
  • Software should be capitalized over 7 years.
  • Software purchases that do not meet the above criteria will be expensed as incurred using G/L account 536035 Software.  

Upgrades/Additions to Capital Equipment purchased on the same requisition as the equipment being upgraded, will be capitalized regardless of cost if meeting all the other requirements. An upgrade for equipment already on inventory will be capitalized only when the cost is $5,000 or more and it meets all other capitalization requirements.

Buildings:  The estimated useful life of buildings and their related components is based primarily on experience with similar building types. Guidelines from publications issued by the National Association of College and University Business Officers (NACUBO), the American Hospital Association, and others may also be used, especially for the initial establishment of estimated lives. The following useful lives have been established for buildings:

Component

Useful Life (years)

Structure 50
Electrical system 20
HVAC system 20
Plumbing system 20
Fire Protection 20
Roofing 15
Elevator 15
Original complement equipment 10
Fixed equipment 5-20
Lab renovations 10-20
  • Constructed Buildings:  Costs should include all costs necessary to get the building ready for its intended use. These include materials, labor, attorneys and architects fees, and interest costs incurred during the construction period in accordance with GASB Statement 34.
  • Purchased Buildings:  Costs should include the purchase price, fees, and any other costs incurred to get the building ready for its intended use.
  • Donated Buildings:  Recorded at fair market value (appraisal) at date of gift, plus any costs incurred to get the building ready for its intended use.

Building Components and Fixed Equipment:  Major integral components of new buildings will be capitalized and depreciated separately from the main structure. Non-moveable equipment and certain components not considered to be major in relation to the total building cost will be capitalized as fixed equipment. Examples include: plumbing, electrical, HVAC and fire protection systems, roof, original complement equipment, elevators, and interior finishes.

Building Additions:  These are creations of new assets and will be capitalized following the same policies as described above.

Building Improvements and Replacements:  These are substitutions of one asset for another. Improvements are the substitutions of a better asset for an existing one. Improvements or renovations made to laboratories, classrooms, etc., which do not extend the useful life of the building, will be depreciated over the useful life of the renovation or the remaining life of the building, whichever is shorter. Improvements or renovations to fully depreciated buildings will be depreciated over their own estimated useful lives.

  • Replacements are the substitutions of similar assets. These should be capitalized based upon the following:
  • If the cost of the old asset is known, that cost will be removed from the books and the cost of the new asset will be recorded.
  • If the cost of the old asset is not known, there are two ways to record it:
  • Estimate the cost by using a construction price index applied to estimated replacement value, or
  • Capitalize the new cost, leaving the old cost on the books.  This may be justified if the old asset is nearly fully depreciated because the differences in book value would not be significant.  This method should only be used when estimated cost of the old asset is difficult or impossible to obtain.
  • Improvements or renovations made to laboratories, classrooms, etc., which do not extend the useful life of the building, will be depreciated over the useful life of the renovation or the remaining life of the building, whichever is shorter.  Improvements or renovations to fully depreciated buildings will be depreciated over their own estimated useful lives.
  • Capitalization Levels:  The minimum capitalization level for buildings, additions, improvements, etc., as defined above, is established at $100,000 to eliminate unnecessary record keeping for items not considered to be material in relation to total building costs. Identifiable fixed equipment greater than $10,000 will be capitalized as such. Amounts below these minimum levels will be charged to expense when incurred.
  • Original Complement of Equipment:  Equipment not considered part of the building cost will be tagged and accounted for within the Property Management System if it meets the capitalization requirements established for equipment. Original equipment which is required to ready a building for its intended use, but does not meet the minimum capitalization requirements for capital equipment, will be capitalized as original complement equipment and included as part of the building cost. These costs will be accounted for and depreciated separately from the building cost, but individual items will not be separately identified. As the original complement equipment is replaced, it will be charged to expense if it does not meet the requirements for capitalization under the equipment capitalization policy.
  • Landscaping Costs:  These will not be capitalized as part of buildings, but will be capitalized separately as Land Improvements. Refer to Land and Land Improvements policy.
  • Repairs and Rehabilitation:  Expenditures incurred for buildings which do not either extend the useful life of the building or enhance its efficiency, but merely serve to maintain the building at the current level of service, will be charged to expense as incurred.

Land: Purchase costs include all expenditures incurred in obtaining land and making it ready for its intended use. This includes the initial purchase price, closing costs such as attorney fees, recording fees, etc., grading, filling, draining and clearing, and the assumption of any debt, such as mortgages or liens. Gifts of land are recorded at the fair market value at the date of the gift. Any costs incurred to prepare the land for its intended use are also included in acquisition cost.

  • Land Improvements: Included in this category are expenditures incurred to prepare land for its intended use. Examples include: parking lots, yard lighting, fencing, paths, septic systems, fountains, fencing and gates, bleachers, parking borders, swimming pools, tennis courts, retaining walls, athletic fields, and golf courses. The minimum capitalization level for land improvements is $100,000. The useful life is assigned based on guidelines published by the American Hospital Association and ranges from 5-25 years.
  • Infrastructure: Infrastructure includes long-lived capital assets that are a part of a network of assets that can have service potential for an extended period and that are normally stationary. Examples include: streets, roads, and highways; alleys; sidewalks; curbs; culverts; traffic lights/signals; street signage; street lighting; bridges; guard rails; trestles; sanitary and storm sewer collection piping; water distribution piping; drainage ditches/systems; irrigation systems; tunnels; dams; fire hydrants; gas and electric distribution systems; and fiber optic cabling systems. The minimum capitalization level for infrastructure is $100,000. The useful life is assigned based on guidelines published by the American Hospital Association and ranges from 5-25 years.

Leases: A capital lease is one that transfers substantially all the benefits and risks of ownership. Such lease, that is more than $500,000, is accounted for as an acquisition of an asset. Other leases should be accounted for as operating leases (Rentals). Leases must meet at least one of the following criteria for capitalization:

  • The lease transfers ownership of the property to the lessee at the end of the lease.
  • The lease includes an option to buy the leased property at a bargain price.
  • The lease term is equal to or greater than 75 percent of the estimated useful life of the leased equipment.
  • The present value of rental and other minimum lease payments equals or exceeds 90 percent of the fair value of the leased property less any investment tax credit retained by the leaser.
  • The criteria in items 3 and 4 above are not applicable when the lease term falls during the last 25 percent of the total estimated life of the leased property.
  • Leases that do not meet any of the criteria are classified as operating and are expensed as incurred.

Items Excluded from capitalization:  The following will not be capitalized, regardless of cost: repairs, replacement parts, liquids, gases, glass, rubber, cloth, and maintenance charges.

Related Documents, Forms and Tools

History and Updates

This document revises University Policy effective July 1, 2000, Property Accounting -General Property Accounting Procedures.