Section 12 - Property Accounting

Section 12.3 – Capitalization Policy

Date: 9/24/07 — Approved: A.S. Finance Board

MAJOR CHARACTERISTICS:

The major characteristics of taggable assets are:

Additional "considerations" to help determine which acquisitions should be coded as taggable are that generally taggable assets cost a minimum of $2,500, the item will be used longer than one year, or the item is easily stolen (Part of the purpose of tagging items is to be able to track them in cases of theft).

VALUING THE ASSET

Taggable assets are valued at their acquisition price, which includes all money spent to make the item usable. The purchase price, freight costs, tax, and any installation costs are all considered part of the acquisition price of the asset. The total acquisition price is shown on your green sheet.

Example: You buy a saw for $2,500 and the invoice includes tax and freight for $58.50. The total acquisition price to enter on your green sheet is $2,558.50.

Example: You buy a personal computer for $2,500. The costs for cables and labor for installation to be able to use your computer total $100. The total acquisition price of the computer is $2,600.

ADDED VALUE

Expenditures that significantly add to the life of a tagged asset are considered added value. Ordinary repairs are expenditures that maintain the existing condition of the asset.  Ordinary repairs are NOT added value.  Replacement of minor parts, lubricating and adjusting of equipment, repainting and cleaning are examples of the type of repair and maintenance charges that occur regularly and are treated as ordinary operating expenses.

An expenditure is considered added value if:

  1. The useful life of the asset is measurably increased; or
  2. The quantity of services produced is measurably increased; or
  3. The quality of the units produced is enhanced.

To add value to an asset turn in a green sheet with the invoice and reference the asset number of the item to which you wish to add value.  Please note "added value" on the green sheet.

Example: If a total overhaul occurs, the useful life of the asset is measurably increased and therefore the cost should be added to the value of the asset. 

Example:  Additional RAM for a computer is purchased, resulting in increased capabilities of the asset. The cost of the additional RAM should be added to the value of the computer.

Example:  Old tables with no remaining value are refurbished with new tabletops.  The cost of refurbishing is the added value to this asset.

Minimum Cutoff for Added Value:
Add value when the expenditure is at least 10% of the acquisition price of the item or at minimum, $100. 

Example:  You purchase 10 steering cables at a cost of $5.00 each to install on 10 outboard motors valued at $1800.00 each.  The value of each steering cable is less than 10% of the acquisition price of the motors and less than $100. Therefore, the cables would NOT be added value.

EXCEPTIONS TO THE GENERAL RULES

Items NOT tracked: 

  1. Rental equipment
  2. Vacuum Cleaners
  3. Leasehold Improvements (items attached to the building; i.e. curtains, transformer panels)
  4. Calculators

Specific Guidelines

Computers 

Assign ONE number to the computer to include the monitor, keyboard and the CPU, and put the tag on the box (CPU).  After the computer is up and running, additional purchases of a modem, additional RAM or an upgrade to the hard disk are considered "added value".  Printers are tagged separately.

Software

Software should be tagged if cost is over $2,500.00.  The actual tag for the software should be placed on a spreadsheet that will be provided by the Accounting Office for all fixed asset items that the actual tag cannot be placed on.  Each version of the software (e.g. Windows Office vs. Windows XP) is considered an item and should be tagged separately.

In‑house building of taggable items

Call the Accounting Department staff when you first start to build the asset.  They will assign you a special account number to use to code all invoices to during the building process.  When the job is completed fill out a green sheet with the tag number, the asset description and location, etc.  Inform the accounting department that the project is finished.    The accounting department will fill in the acquisition price and transfer all expenditures from the special account to the appropriate taggable account via a journal entry.

Tags

Each area should have a set of tag stickers.   Attach the tag to the asset, and complete the green sheet.  Place the TAG where it can be EASILY seen, preferably on the front of the asset.  If the tag cannot be placed on the asset then the tag should be placed on a spreadsheet that will be provided by the Accounting Office.  When one number is assigned to a group of items, that number should be clearly marked on each item.  Attach the completed green sheet to the invoice and forward to the AS Accounting Office.

AS Accounting Office Procedures

The AS Accounting Department is responsible for ensuring that taggable assets are tracked.  If an invoice for a taggable asset does not have a green sheet they will inform you via Email.  If the Accounting Department determines something should be tagged and you have not coded it to a taggable account, they will phone you to discuss the situation, however, the Accounting Department will make the final decision on whether an item should be tagged.  At the end of each period Accounts Payable will enter the information from the green sheets onto the FAS (fixed asset software).

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