A valid capital inventory entity that may or may not have component parts

Capital Inventory Entity
For the purposes of the Capital Inventory Control System, the following general guides should be used to determine whether or not an item should be considered for entry into the Capital Inventory System. If there is any doubt as to the status of an item, Financial Policy and Procedure Paper (FPPP) #33 [FPPP 33] should be consulted for final determination.

Capital Equipment
Any single asset which has an acquisition cost of $5,000 or more and a useful life of more than one year, whether purchased outright, acquired through a capital lease or through donation. It also includes certain constructed or fabricated items and certain component parts. It does not include real property (land), software or library holdings (see FAP - Financial Reporting of Library Holdings (F47)).

Capital Lease
A lease is defined as an agreement conveying the right to use property or equipment for a specified period of time. Actual title to the property is not transferred to the lessee. A lease agreement must be evaluated to determine whether the transaction should be treated as a capital lease, an operating lease or a rental expense. If at its inception a noncancelable lease meets one or more of the following criteria, the lease must be classified and accounted for as a capital lease:

1. The lease transfers ownership to the lessee by the end of the lease term.

2. The lease contains a bargain purchase option (a provision allowing the University, at its option, to purchase the leased property for a price, which is sufficiently lower than the expected fair value of the property at the date, the option becomes exercisable).

3. The lease term is equal to 75% or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

4. At the inception of the lease, the present value of the minimum lease payments, excluding executory costs, to be paid by the lessor, including any profit, equals or exceeds 90% of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by the lessor and expected to be realized by him. However, if the beginning of the lease falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

The asset is capitalized at the present value of the minimum lease payments.

Constructed And Fabricated Equipment
Constructed equipment shall be capitalized if the cost of material and labor incurred by the UW institution is $5,000 or more and its useful life is one or more years. Labor costs should be included only when these costs are documented by an external source or in-house shop. Documentation normally would include internal or external requisitions.

Donated Capital
Donated equipment shall be capitalized if the fair market value on the date of gift is $5,000 or more and its useful life is one or more years.

Replacement Parts
Subsequent replacements or enhancements made to the unit shall be capitalized if they have an acquisition cost of $5,000 or more and a useful life of two or more years. Replacement parts that are acquired as part of normal repair and maintenance are not capitalized.

Library Acquisitions
Library acquisitions are to be considered capital items subject to the guidelines of FPPP #47. They are not considered capital equipment and are out of the scope of this manual.

Art Collections
Art collections are to be considered capital items subject to the guidelines of FPPP #47. They are not considered capital equipment and are out of the scope of this manual.

OIT
Office of Information Technology

Component Part
Any physical piece of equipment

System
The following are definitions of systems and components:

1. System
   
   1. Two or more individual items of equipment that are connected. Systems are added to the capital equipment inventory file if both of the following conditions are met:
      
      1. The total cost of the component parts exceeds $5,000.
         
      2. Component parts with an individual value of less than $5,000 cannot be operated independent of the system.
   
   
2. Major Component
   
   1. An equipment item that costs over $5,000, free standing and connected to another piece of equipment.
   
   
3. Minor Component
   
   1. An equipment item that costs over $5,000 which cannot be used by itself without a major retrofit.
      
   2. A minor component is attached to a major component.
      
      1. The minor component purchased at the same time as its major component is added to the value of the major component as a system. See A above.
         
      2. A minor component purchased subsequent to the purchase of a major component is inventoried separately. Cross-references to the related inventory numbers are entered in both the major and minor component inventory records.
   
   
4. Supply Component
   
   1. A freestanding or non-freestanding piece of equipment, that costs under $5,000.
      
   2. A supply item by itself is not capital equipment, and therefore, is not inventoried.
      
   3. A supply item and its cost may become a permanent part of a major component or an assembly under the following circumstances:
      
      1. The supply item is purchased at the same time as the major component. (Not necessarily on the same P.O.)
         
      2. The supply item is purchased from residual capital funds from the grant that funded the original purchase.

For purposes of inventory, the component part that either has the highest value or is the most visible will act as the inventory item. This component part will carry the inventory tag and all of the value of the system. All inventory information (serial numbers, model numbers and so forth) will be information for the component part that either has the highest value or is the most visible. The inventory description of the item will end in the word "SYS" to signify the system status of the item.

The following procedure should be used to requisition inventory systems.

Part 1 The Purchase Requisition
At the end of the purchase requisition, define the purchase of a system using the following procedure.

1. Type the word "NOTE".
   
2. List the PO line items that will make the system. Separate the items with commas.
   
3. Insert 2-4 spaces after the number list.
   
4. Indicate the number of systems with this configuration.
   
5. Insert 1 space after the number of systems.
   
6. Type the word "SYS".
   
7. Start a new line for each new system configuration.

   NOTE: If more than one vendor is used to purchase the component parts, a cover letter needs to be submitted with the requisitions to properly notify Purchasing of a system purchase that needs to be capitalized.

Part 2 The Capital Inventory Addition Form
On the front of the form the word "SYS" should be placed at the end of the description of the main component of the system. Only the main component will be inventoried. It will be inventoried with a value equal to the sum value of the system of components. Let the main component be either the most expensive component or the most visible component.

On the back of the form the following items should be placed in the "Notes" box:

1. A brief description of the main component.
   
2. The word "INCLUDE:"
   
3. A list of the component parts that should be included with the system. Each item in the list should have a short description, and either a part number or a model name.

Home Department
The home department is any department on the campus that purchases a piece of equipment for use in that department. The term is used to distinguish those departments from Central Receiving located in Central Stores and Maintenance and the Central Purchasing located on the Second Floor of Brigham Hall.

Inventory Control
The office responsible for the maintenance of the official equipment inventory for UW-Platteville. The office is located at 323 Brigham Hall. You may contact Inventory Control at 342-1174 or by e-mail to: inventory@uwplatt.edu

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