| Plant Acquisitions
Plant acquisitions are divided into four categories:
- land
- improvements to land other than buildings
- buildings
and
- fixed property.
Land
- Acquisition by Purchase - Land purchased by the university is
recorded at cost. Cost includes land; legal, title, and broker’s fees; landfill;
and clearing, grading, and other costs necessary to prepare the land for its
intended use.
- Acquisition by Gift or Bequest - Recorded at the fair market value at
the date of the gift (appraisal usually has been completed).
- Acquisition through Eminent Domain - Recorded at the amount of the
court award made to the landholder(s).
Improvements to Land Other than Buildings
This category consists of land improvements outside the building.
Improvements to land other than buildings, which are required to make land ready
for its intended use, are capitalized if the total expenditure is $100,000 or more per
project.
This category includes roads, walkways, tunnels, utility facilities, drainage
systems, landscaping, parking lots, tennis courts, athletic fields, fences,
curbs, streetlights, and similar items.
Buildings
- Buildings - The cost of buildings (permanent structures housing
persons and personal
property) is the construction cost of the building shell and its components.
Examples of construction costs include, but are not limited to, building
materials, architects�fees, building permit fees, subcontract fees, rent for
property, other than real
property, to complete construction, operating and maintenance costs for
property used in the construction, site preparation, compensation for work
performed, and cost of supplies consumed in the construction. Capitalization takes place
during the completion of the project.
- Building Components - Building components are items permanently
attached to the building shell necessary for the building to be used as
intended. Building components are either integral to the building or cannot be
removed without damaging the building or component. Examples of building
components are plumbing systems, electrical wiring, and air-conditioning duct
work.
- Building Additions -
New additions to buildings resulting in additional square footage are
capitalized regardless of the dollar threshold.
- Renovations - Major building component replacements or renovations of
a building that extend the original life of the building and/or increase its
value to the university are capitalized with the exception of projects involving
expenditures of $100,000 or less, which are considered expense.
- Demolition Costs - The cost of building demolition in preparation of
new construction is added to the cost of the new building as “site preparation
costs.�If new construction is not planned, the demolition costs are not
capitalized.
- Planning - Professional services and fees incurred with construction
and remodeling (e.g.,
architects�fees, construction and management fees, and engineering studies).
Fixed Property
Fixed property (building fixtures) includes carpeting, drapes, shades,
venetian blinds, shelving, bulletin boards, awnings, and lab benches bolted to
the floor. (Fixtures must be able to be removed without extensive alterations to
the building structure and cannot be so affixed as to be legally considered part
of the real property.)
| Note: |
Although building fixtures are attached to a building structure or interior
wall, they are not permanently attached. This means that such items can be
removed without costly or extensive alterations to the building structure.
Equipment that is permanently attached is classified as other building capital,
described below. |
Coding Criteria
- If $100,000 or More
- If the total acquisition cost of the fixture purchase (item[s]) is $100,000
or more, the purchase is coded as a capital acquisition.
- If Less than $100,000
- If the total acquisition cost of the fixture purchase is less than $100,000,
the item is coded as an operational purchase.
Equipment Acquisitions
When acquiring equipment on an online purchase request (RX) or an online
internal purchase order (PO), correct object/sub-object codes are essential for
determining capital vs. noncapital equipment. (For a list of capital equipment codes, see
the Financial Services Policies and Procedures Manual�/I>FIN 430�1, “Overall Expenditure
Coding Structure.� Correct commodity codes are also important to the timeliness
and accuracy of reporting equipment in the property control system (see the Purchasing and Business Services
Web site for the complete “Commodity Code Listing�.
Property Control records the item in the property control system at cost (net
of any discounts and inclusive of freight, taxes, and installation), tags the
item with a unique ASU identification number, and performs a physical inventory
of the item once every two years or, in the case of equipment purchased with
sponsored funds, as required by the sponsoring agency.
Capital Equipment
- Capital Equipment - Equipment that is not permanently attached to
buildings or grounds, has an acquisition cost of $5,000 or more (exclusive of
sales and/or use tax, or freight),
and has a life expectancy of one year or more is classified as capital
equipment.
- Trade-ins - The fair market value of equipment used as a trade-in to
acquire new equipment is included in the cost of the new equipment in the
property control record.
- Gifts - Gifts and bequests are recorded at the fair market value at
the date of the gift. The value of gifts and bequests in excess of $5,000 is
determined through independent appraisal or through other approved valuation
procedures.
- Fabricated Equipment - Fabricated equipment having a completion cost of $5,000 or more
and a life expectancy of one year or more is capitalized. The amount recorded
should include the total of all identifiable direct and indirect costs.
Special Considerations
- Microcomputers (Personal Computers)
- The cost of microcomputers includes keyboard, Central Processing Unit (CPU),
monitor, and operating system and is capitalized if the sum of these components
equals $5,000 or more. Other computer peripherals are capitalized only if
individual components meet the definition of capital equipment (more than
$5,000).
- Equipment Acquisitions and Fabrications Exempt from Sales Tax
- Equipment having a life expectancy of one year or more and a unit cost of
$5,000 or more that is purchased for basic and applied research in the sciences
and engineering is, to the extent permitted by law, exempt from sales tax. Also exempt are designing,
developing, or testing prototypes, processes, or new products. This exemption
includes research and development of computer software that is embedded in or an
integral part of the prototype or new product or that is required for exempt
machinery or equipment to function effectively.
For purposes of this exemption, research and development do not include
manufacturing quality control, routine consumer product testing, market
research, sales promotion, sales service, research in social sciences or
psychology, computer software research that is not included in basic and applied
research in the sciences and engineering, or other nontechnical activities or
technical services.
The exemption of sales tax does not apply to equipment with a life expectancy
of less than one year or project cost of less than $5,000. (Fabricated equipment
acquired at less than $5,000 is capitalized as long as the completed fabrication will be greater than
$5,000.) Such items include expendable supplies; janitorial equipment and hand
tools; office equipment, furniture, and supplies; tangible personal property
used in selling and distributing activities; motor vehicles; shops, buildings,
docks, depots, etc.; and motors and pumps used in drip irrigation systems.
- Software
- All software is expensed except for major system purchases ($50,000 or more
per package). These purchases are capitalized as determined by Property Control.
Inventory control of all other software is left to the discretion of the
department having custody.
- Library Books
- Books acquired for use in official university libraries are capitalized at
cost or fair market value (depending on whether purchased or donated). Property
Control does not record or inventory books. Inventory and control are the
responsibility of the individual library.
Books, films, and related materials are coded as materials and supplies
purchases, Books/Reference Material. Books and other materials purchased by the
university or law libraries are the only exceptions and are coded from one of
the agency/orgs listed below.
| Agency/Org Number |
Agency/Org Name |
| MH1 1001 |
Law Library |
| YX1 1002 |
Library Books |
| YX5 1001 |
Gifts—University Libraries |
| YX5 1008 |
Lost Library Books |
| DB9 1001 |
Arthur Young Tax Library |
| DP1 5061 |
Fletcher Library (ASU West) |
- Art Objects, Displays, and Museum Acquisitions
- University-owned art objects, displays, and museum acquisitions are
capitalized at cost or fair market value (depending on whether they are
purchased or donated). These items include art, scientific, and slide
collections; and permanent displays of all kinds. Assets in this category are
entered in the property control system as nontaggable equipment using a dummy
property control number (e.g., 9003457). Inventory and control of these items
are the responsibility of the individual departments.
- Sales/Use Tax, Freight, and Installation Costs
- Sales/use tax, freight, and installation costs associated with any capital
coded purchase are capitalized and considered as part of the value of the
equipment when charged on the same purchase order as the equipment. However,
these costs do not determine whether an item is coded as capital or noncapital
equipment. If sales tax, freight, and/or installation costs are charged on a
different purchase order and cannot be identified to a particular asset, they
are transferred to a noncapital object code.
- Agency Fund Accounts
- Equipment purchases made from agency fund accounts are not considered ASU
assets and therefore should not be coded as capital and should not be tagged
with ASU property control numbers.
Expenditures Relating to Capital Equipment
- Maintenance and Repairs
- Expenditures for maintenance are those required to maintain equipment in
good working condition. Repairs are those expenditures required to bring
equipment back into good working condition. Neither expenditure extends the
intended useful life or changes the intended purpose of the asset. Therefore,
costs incurred for maintenance and repairs are not capitalized. Floor and wall
covering replacements (e.g., carpet, floor tile, and wallpaper) are considered
maintenance and repairs, except when done in conjunction with a remodeling
project.
- Additions
- An addition is capitalized if it meets the minimum requirements for
capitalization as defined below.
- Betterments
- Betterments are capitalized
if they meet the minimum requirements for capitalization as defined below.
Alterations made solely for cosmetic purposes are not capitalized.
- Replacement Parts
- Replacement parts generally do not increase the value and/or intended useful
life of an asset. Therefore, replacement parts are generally not capitalized.
However, if a significant increase in value or useful life is provided through a
replacement part, the guidelines for betterments are to be followed.
- Sale of Capital Equipment between Departments
- If capital equipment is sold between departments, the original cost (or fair
market value when acquired) is recorded under the acquiring department’s
inventory. All records of the property control system remain on file but
indicate the change to the acquiring department.
A financial transaction should be performed on an Expense Transfer (IX) or
Journal Voucher (JV) and should debit the receiving department and credit the
relinquishing department’s agency/org for the selling price using the
appropriate capital object code in both the credit and debit entry. The ASU
property control number of the asset should be entered in the description field
of the IX or JV, thus assisting Property Control with the entry.
- Agency Fund Agency/Orgs
- For agency fund agency/orgs (agency/orgs with 7 as the third digit of the
area field), no property purchases may be coded as capital purchases
(object/sub-object codes starting with 7810).
- Lease/Purchases
- For equipment purchased on a lease/purchase basis, separation is made between the cost of
equipment and interest. The equipment cost is classified according to the
criteria above; interest is charged to an operations object/sub-object code.
- Differences between Estimated and Final Costs
- Coding criteria for equipment purchases are initially based on estimated
cost at time of requisitioning coding. In some cases, final costs differ so much
from estimated costs that the equipment purchase is not correctly coded. In
certain situations, Property Control adjusts the coding (e.g., equipment
purchase estimated to cost at least $5,000 but having a final cost of less than
$5,000, or vice versa).
Remodeling and Other Building Costs
Remodeling changes the use of
building space or refurbishes to make space more functional or more cosmetically
appealing.
Other building costs include installing equipment that is permanently
attached to a building structure so that it cannot be removed without costly or
extensive alterations. Such permanent equipment includes the following:
nonportable, single-room air-conditioning units; fire protection systems; water
distributing systems; heat distributing and electrical distributing systems;
elevator shafts; utility outlets; and computer cabling.
Coding Criteria
- If $100,000 or More
- If the total acquisition cost of remodeling or other permanent modifications
is $100,000 or more, the purchase is coded as a capital acquisition to
object/sub-object code 7890 11, “Building Improvements/Remodeling.�
- If Less than $100,000
- If the total acquisition cost of remodeling or other permanent modifications
is less than $100,000, the item is coded as an operational (“Repairs and
Maintenance� purchase.
Coding Examples
For examples of capital and operational transactions and their codes, see PCS 101B.
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Cross-Reference
For information on the use of capital object codes, see the Financial
Services Policies and Procedures Manual�/I>FIN 430�1, “Overall Expenditure Coding Structure.� |
