Capital Assets

Plant Capitalization, Depreciation, and Disposal Policy

Definition of Plant

Plant expenses relate to the acquisition and maintenance of the land, buildings, furnishing and equipment of the College.  These expenses are recorded in the Workday system in the following categories: 1) capital projects; 2) major maintenance projects; and 3) equipment and furnishing purchases.

A capital project a) extends the useful life of a physical facility by more than five years, b) has a cost of more than $50,000, and/or c) materially increases the market value of an existing facility.  Examples of capital projects include projects to build new buildings, enlarge or structurally renovate buildings, or install major equipment/fixtures that become permanent additions to facilities.

Capital projects are charged in the Banner system to its funding source with the appropriate "P" activity number.  Projects funded by the unrestricted fund should be charged to Fund 90009.  Projects funded by gifts and/or bond proceeds should be charged to other 90000 series funds that are established upon the approval of the project.  Upon completion of the project, the Controller's Office staff will make the appropriate adjustment to the Plant Asset Ledger.

All project-related expenses in a particular year will be capitalized for financial reporting purposes, regardless of individual dollar amounts involved.  For example, hammers and nails, if valid project expenses, will be included in the total amount capitalized, even though they would not be considered items to be capitalized under the definition of equipment (see section 3 below).
 

Major maintenance projects make significant repairs to campus property in order to bring a facility back to a basic standard of repair.

Repair projects will be expensed regardless of the individual dollar amounts involved in the project.  For example, a major painting project costing $50,000 would be expensed, not capitalized, because its purpose is to bring a property back to a basic standard of repair.

Major maintenance projects that cost more than $50,000 and extend the useful life of a facility (such as installation of a new roof) will be capitalized as explained in section one, above.

As a general guide, the College has determined the following treatment for certain types of major maintenance projects:

• Exterior painting projects
• Miscellaneous repairs to furniture and equipment
• Roof repairs (as opposed to replacements)
   

• Replacements of major building systems or components (e.g. roofs, boilers, steam distribution systems)
• Maintenance of parking lots and major landscaping
• Carpet installations
• Upgrades to heating and ventilation systems
   

Major maintenance projects are charged in the Banner system with the appropriate "M" activity number to the Unrestricted Fund 90009. On a quarterly basis, the Controller's Office and Physical Plant Administration staff will review the list of current projects and determine projects scheduled for capitalization.

Equipment and furnishing purchases greater than $5,000 with a useful life of three years or more will be capitalized.  The following procedure will be followed to ensure appropriate capitalization:

1. Equipment and furnishings costing more than $5,000 will be recorded in Workday as an expense to the department making the purchase and charged to account number 7020.
2. On a quarterly basis, Controller’s Office staff will analyze specific invoices before the purchase is capitalized.
3. As a general rule, individual invoices making up a purchase must exceed the $5,000 threshold to be included for capitalization.  However, if it is clear from the detail review that a single piece of equipment costing more than $5,000 was billed from several invoices, then it will be capitalized.  Alternatively, if an invoice in excess of $5,000 is actually an accumulation of a number of pieces of equipment valued individually at less than $5,000, then it will not be capitalized.
4. The capitalization entry will be made in the plant asset ledger, thus not affecting the individual department’s budget, but allowing appropriate capitalization for financial statement purposes.

Depreciation

The Controller's Office staff will determine the useful life of the capital asset based upon the following guidelines:

Depreciation will be pro-rated based on purchase date.

Disposals

On an annual basis, the Controller's Office will forward a list of fully depreciated equipment and furnishings to each department for review.  For any items that are no longer in service, the department should note it on the list with an explanation.

The Controller's Office will remove all disposals from the Plant Asset Ledger.