Capital Assets Management
Revised: July 1, 2010
Also refer to Signature Authority Policy
Table of Contents
Capital Assets Management Policy
Long-lived Assets Defined
Capitalization Threshold Defined
Property Control System Defined
Original Cost Defined: Purchased Items
Original Cost Defined: University-Constructed Long-Lived Assets
Original Cost Defined: Donated Long-Lived Assets
Original Cost Defined: Leased Equipment
Capital Lease Defined
Operating Lease Defined
Capital Asset Acquisition Procedure
Equipment Manager Defined
Personal Use of University Property
University Depreciation Methodology
Physical Inventory of Capital Assets
The University maintains records of all its long-lived assets (whether purchased or donated) in a centralized property control system. The original cost of long-lived assets meeting the University's capitalization threshold is capitalized and depreciated over the asset's useful life. Departments are responsible for the care, maintenance, and use of all long-lived assets in their custody. Purchase orders are required for the purchase of long-lived assets.
Nonexpendable property (i.e., land, buildings, furniture, and equipment)
- having a useful life greater than two years or extends the life of a building,
- an original cost of ≥ $5,000, and
- provides future benefit to the University.
The process by which the long-lived asset is recorded at its original cost in the University's financial records. This cost is then depreciated over the useful life of the asset.
The minimum amount at which the University will capitalize rather than expense long-lived assets. The University's capitalization threshold is $5,000.
Note: This threshold applies to individual or constructed items costing at least $5,000. For example, a piece of furniture with a purchase cost of $5,100 would be capitalized while a modular workstation having individual detachable components each costing less than $5,000 would not.
Purchased assets, except library collections, meeting the threshold above are capitalized when received by the University. Library collections and construction are capitalized annually as part of year-end financial reporting procedures. Construction not yet completed (i.e., construction in progress) is capitalized annually but not depreciated until construction is complete and placed in use.
A system containing all relevant accounting information for each long-lived asset wherein each asset is given a unique identifying tag number.
Original cost includes cost minus any discounts plus:
- delivery charges,
- costs of installation, and
- modifications, attachments or accessories required to make the item usable for its acquired purpose.
Original cost does not include:
- repairs, or
- demolishing, dismantling or disposing of equipment, or
- rearrangement, transfer or moving of capitalized items from one location to another, or
- maintenance contracts or warranties.
All direct costs (labor, materials and variable overhead) of University-constructed long-lived assets are capitalized. Capitalized cost may not exceed fair market value.
To be capitalized in the property management system, donated items must have a fair market value ≥ $5,000 and a minimum useful life of two years on the date of the gift. Fair market value is used as the original cost amount and is determined by a qualified independent appraisal.
Note: Contact University Development. Only University Development is authorized to accept donated long-lived assets.
Equipment leased by the University is capitalized if, at the inception of the lease, the fair market value is ≥ $5,000 (determined by the Purchasing Department), and
- the lease transfers ownership of the property to the University at the end of the lease term, or
- the lease contains a bargain purchase option, or
- the lease term is 75% or more of the estimated economic life of the leased property (see Depreciation Policy for useful lives), or
- the present value of the minimum lease payments equals or exceeds 90% of the fair market value of the leased proper
A lease is a contractual agreement between a lessor and the University (the lessee) that gives the University the right to use specific property, owned by the lessor, for a specific period of time in return for stipulated cash payments. There are two types of leases: capital and operating.
A lease is a capital lease if the equipment costs $5,000 or above and the lease meets one of the following criteria:
- The lease transfers ownership of the property to the lessee.
- The lease contains a bargain purchase option.
- The lease term is equal to 75% or more of the estimated economic life of the leased property.
The present value of the minimum lease payments equals or exceeds 90% of the fair value of the property.
Any lease that does not meet the criteria for a capital lease.
Follow the procedure below to acquire and place in service long-lived assets:
|1||Department completes an on-line requisition utilizing the appropriate "Q" commodity code (see FTVCOMM Banner Form for complete listing).|
|Note: A purchase order is required to purchase long-lived assets.|
|2||Upon receipt, department thoroughly inspects the asset(s).|
|If the asset(s)...||Then...|
|3||Equipment manger affixes a pre-numbered University property tag to the asset and completes a Capital Asset Check-In form.|
|Note: Tag may be obtained from Financial Reporting|
|4||Forward Capital Asset Check-In form to Financial Reporting.|
|5||Notify Financial Reporting of any long-lived asset transfers or returns.|
|Note: See Surplus Property Disposition Policy for disposal of University property.|
Individual(s) at each campus are responsible for the following:
- Inspecting and tagging new equipment.
- Recording and reporting to the Controller's Office the movement and disposal of equipment.
- Conducting physical inventory of equipment as requested by Controller's Office.
- Enforcing compliance with University policies and procedures regarding maintenance and security of capital assets.
Use of University material or property in the care and custody of the University, by University employees for personal purposes is not permitted. It is to be explicitly understood that if University property is used for personal purposes the University insurance policy does not provide for coverage and the liability (i.e., repairs, replacement, etc.). Therefore, liability for said property rests with the individual or individuals responsible for the property.
Process by which the cost of long-lived assets is expensed over the estimated useful life of the asset.
The University utilizes straight-line depreciation with a half-year convention in the year of acquisition and year of disposal. Depreciation is calculated from the date placed in-service until the date disposed. The following useful lives are used:
|Asset Type||Useful Life (in Years)|
|Audio Visual Equipment||5|
|Heavy Maintenance Equipment||10|
|Vehicle and Light Maintenance Equipment||5|
The University will periodically require departments to confirm (i.e. take a physical inventory) the presence of capital assets. Upon receipt of the Fixed Assets Property report from Financial Reporting, the equipment manager inspects each piece of property listed on the report and signs the report indicating inspection is complete and notes any changes that need to be made.
Note: Internal and/or external auditors may inspect capital assets from time-to-time to verify existence.
Surplus Property Disposition Policy.
Contact Financial Reporting for additional information.