Capitalization of Assets
October 17, 1991
July 1, 1997
Certain items purchased by the University have a significant cost and a useful life of more than one year. Therefore, these items are recorded as assets (capitalized) in the Plant Funds and depreciated over their estimated useful lives, in accordance with University guidelines.
Expenditures for land, buildings and improvements other than buildings of $25,000 or more should be capitalized. Furnishings and equipment purchased for a unit cost of $5,000 or more should be capitalized. Equipment or furniture purchased in conjunction with a building renovation, a new program, or new clinic, but not having a unit cost of $5,000 or more should be capitalized as a group purchase. All library books should be capitalized regardless of their unit cost.
All depreciation and amortization calculations should use the "straight line" method. For financial statement purposes a full year of depreciation expense for an asset will be recorded in the year of acquisition or project completion, while no depreciation expense will be recorded in the year of the asset's disposal. For indirect cost proposal purposes, a half year of depreciation expense for an asset will be recorded in the year of acquisition or project completion and a half year of depreciation expense will be recorded in the year of disposal. Land is not depreciated. The expected useful life of each category of asset is:
Acquisition of Buildings - Purchase of Construction
Autos, Vans and Passenger Vehicles
Computer Software, Hardware and Related Accessories
All Furnishings and Equipment not specifically defined in other classifications
Collections, Historical Treasure, and Unique Structures
Indirect Cost Proposal
General Construction including:
Slab on ground
Framing & external walls
Site Preparation including:
Clearing, grading, & installing public utilities
Roof & Drainage including:
Roof covering materials & roof drainage
Interior Construction including:
Wall partition material & finishes
Sinks, lavatories, drinking fountains, bathtubs, showers, urinals, etc.
Heating, Ventilation & Air Conditioning including:
Rooftop packaged units
Central cooling systems
Wiring & lighting
Fire Protection, Light Safety including:
Fire alarm & fire detection systems
Intrusion alarm systems
Public address systems
Improvements Other Than Buildings
Roads and Landscaping
Utility Tunnels and Conduits
Pipeline Energy Systems
Recreation Courts and Athletic Fields
Furnishings and Equipment
Trucks, Buses and Cargo Vehicles; Major Equipment, Audiovisual Equipment, Copiers, Microfiche Readers, Med/Research Electronics for Teaching and Labratory
Autos, Vans and Passenger Vehicles
Computer Software, Hardware & Related Accessories
All Furnishings and Equipment Not Specifically Defined in Other Classifications
Collections, Historical Treasures, and Unique Structures
Asset Category Definitions:
Definitions of each asset category are presented below to assist in classifying where an item most properly fits.
Capitalized at acquisition cost including assessments, legal and recording fees; draining, filling, other site preparation costs; judgments levied from damage suits; demolition (razing) costs of structures on land acquired as building sites. Land acquired by gift will be capitalized at market or appraised value at the time of acquisition. The acquisition cost of property which includes structures not to be razed (torn down) will be allocated between land and buildings based upon appraised values.
Acquisition By Purchase - Buildings acquired by purchase will be capitalized at acquisition cost with the purchase price and associated closing costs allocated between land and buildings on the basis of current appraised values. Additional costs incurred for the purpose of renovating or modifying the building's structure in order to place it in service will also be capitalized.
Acquisition By Construction - Initial capitalization includes construction costs of the building structure, including all internal piping, wiring, and permanent fixtures associated with the distribution of utilities within the building. Costs should also include architectural and engineering fees, inspection fees and permits, bid advertising expenses, construction financing / interest expense, and insurance costs incurred during the construction period.
Major Renovations and Leasehold Improvements - Renovations and improvements will be added to the capitalized value of the existing structure being impacted. Such additions would include the following:
- Ramps, truck doors, fire escapes and other appurtenances.
- Improvements requiring modifications of the structure to comply with current fire, health and safety codes.
- Improvements undertaken to convert unusable floor space into usable floor space; or upgrade the use of floor space, (i.e., converting storage areas to office/classroom space).
- Modernization of the structure as a whole, and not merely a rearrangement of selective office/classroom areas.
- When the renovation project involves a significant razing of the existing structure, the cost of the portion that was razed should be removed from the asset. If the original cost figures are unavailable, a reasonable estimate of the original cost should be used.
If the modification to the structure is determined by Facilities Management personnel to be a complete renewal of the facility, the improvement may be depreciated over 40 years. Most other renovations will fall into the 10 year category. All useful life determinations are subject to review by the Controller's office.
Improvements Other Than Buildings -
This category includes costs of improvements to land owned or used by the University (excluding buildings). The nature of many improvements is such that it is impractical to inventory these items for the purpose of assuring that the value of the improvements, or portions thereof, are removed from the accounts upon abandonment, replacement, or modification. Accordingly, various classes of improvements will be capitalized and depreciated for a specific period of years. It shall also be the University's policy to capitalize all costs in this category which are incurred in conjunction with a major building project, even if the amount of the improvement is less than the stated Cost Guideline discussed above.
Roads and Landscaping - Includes construction costs of sidewalks, drives, parking lots, outdoor lighting, shrubs and trees, lawns, and ground watering systems for lawns. Also includes surveying, filling, and draining costs if such costs are incurred solely for the installation of the improvement and are not part of an overall land acquisition and construction project. Additions to existing sidewalks, drives, and parking lots should be capitalized in the year completed. Maintenance, partial replacement and resurfacing projects are to be charged to expense during the period in which the work is completed.
Utility Tunnels and Conduits - Includes the cost of converting the utility tunnels as well as any piping installed in the tunnels for the purpose of carrying equipment related to the distribution of utilities. Costs include sanitary and storm sewers and related construction and materials, as well as installation costs and legal and other fees, licenses, surveying, equipment rental, and any other such costs incurred in the construction of the facilities.
Pipeline Energy Systems - Includes the cost of providing utility generation systems within power plant structures as well as facilities and equipment for the transmission of utilities from one location to another. Utility generation systems within a building such as internal piping and wiring are capitalized as part of the building cost. This category includes the installed cost of equipment used in the generation of heat, power, steam, electricity and cooling, along with the cost of any equipment, switch gear and wiring. Additions or extensions to existing utility generators and distribution capacity will be capitalized in the year such addition is completed.
Recreation Courts and Athletic Fields - Includes the initial construction costs of recreation courts and athletic fields. Also includes surveying, filling and draining costs if such costs are incurred solely for the installation of the improvement and are not part of an overall land acquisition and construction project.
Furnishings and Equipment -
Items in this category will be capitalized at net invoice price or market value, if acquired by gift, plus freight and installation charges.
Trucks, Buses and Cargo Vehicles; Major Equipment, Audio Visual Equipment, Copiers, Microfiche Readers, Medical/Research Electronics for Teaching and Laboratory Use - Vehicle cost includes net invoice price plus any dealer preparation and local delivery costs. Major equipment cost includes any site preparation costs and shipping, as well as all costs associated with the installation of the equipment.
Autos, Vans and Passenger Vehicles - Includes net invoice price plus any dealer preparation and local delivery costs.
Computer Software, Hardware and Related Accessories - Computer software includes net invoice cost and any related consulting and/or training costs associated with the initial software implementation. Internally developed software costs are expensed during the period incurred.
Computer hardware and related accessories include net invoice cost plus freight and installation charges.
All Furnishings and Equipment Not Specifically Defined in Other Classifications - This typically includes furniture, apparatus, machinery, implements and tools used in laboratories, offices, shops, store rooms, and auxiliary enterprises, provided that such equipment has an economic useful life of at least two years and meets the required minimum Cost Guideline for this category.
Collections, Historical Treasures, and Unique Structures - St. John's Church and the Administration Building are the primary examples of "unique structures" at this time.