- Capitalization of Moveable Equipment
An item must meet two specific criteria in order to qualify as a capital purchase. It must have (1) an acquisition value of at least $5,000 and (2) a useful life expectancy of one year or greater.
In some instances, purchases of components can be capitalized together as one asset under moveable equipment, referred to hereafter as system assets. System assets are defined as components that work together to perform one function. Each component is necessary for the system to function as a whole. Removal of any one component would result in the system not operating at the required capacity or for its intended purpose.
Systems should meet the following conditions:
- Physical attachment- the components are connected in a manner of dependency greater than a cable or wired connection. The term "piggy-back" may be applicable to describe the situation. Ultimately, if the only means of attachment is a cable, we recommend the components be created as individual assets.
- Lack of Interchangeability- the components cannot be disconnected from the system asset and used in a similar manner with another system.
The physical inventory should be a consideration when combining components to create system assets. For components over the $5,000 threshold, Capital Asset Management recommends these items be created as individual assets. We feel this is more efficient and effective for physical inventory inspection.
Organizations will be required to complete a System Asset Attestation Form to identify components as system assets. The form will help University Capital Asset Office personnel identify the components in the system, and will require the organization to attest by signature that the items will work together to perform one function and that each item is necessary for the system to function as a whole.
Upgrades are capitalized when any one of the criteria listed below it met:
- The upgrade is for an existing asset purchased in the current fiscal year.
- The upgrade is for an asset purchased in a prior fiscal year, AND the cost of the upgrade is 5,000 or more.
- A substantial increase in the functionally of the equipment which allows it to function or perform tasks it was previously incapable of performing.
- A substantial increase in the efficiency of the equipment, that is, an increase in the level of service provided by the equipment without the ability to perform additional tasks.
- An extension of the estimated useful life of the equipment.
Generally equipment that is attached to a building will be capitalized as moveable equipment when removing the equipment does not cause structural damage to the building and will not destroy the equipment.
The term "equipment" includes delivery equipment, office equipment, machinery, furnishings, factory equipment, and similar fixed assets1.
Additional capitalized costs on moveable equipment:
Service costs that can be capitalized with equipment purchases include:
- Cost of assembling the asset
- Cost of installation
- Freight
- In-transit Insurance
- Preparing the site and asset for its intended use
- Training
When additional equipment is received on a purchase order at no cost, these items are considered gifts to the university. These gifts will be taken into consideration when assigning the unit cost of the line items on the purchase order. The total quantity (including gifts) will be divided by the invoice amount. If the gift takes the unit cost below the capitalization threshold the expenses will be reclassified to supplies and expensed.
Assets are recorded net of cash, and other earned discounts. In addition a trade-in allowance will result in the reduction of the acquisition value.
(See CSOP 10.0 Trade-in of Similar Capital Equipment)
The following are not considered capital equipment regardless of cost or useful life:
- Repair or replacement parts. (Use object code 4700- Repair & Maintenance or 4776 -Service or Support Maintenance Contracts.)
- An item or substance that has no shape or identity, or loses that shape or identify upon detachment or removal from its original location. (Use object code 5200- Expendable Equipment.)
- Maintenance and Warranty agreements (Use object code 4776 - Service Maintenance Contracts.)
- Purchased software and software license agreements are not capitalized unless ownership is indicated within the license agreement and the acquisition cost is $500,000 or more. Software and software license agreements not indicating ownership or having a value of less than $500,000 should be expensed to 4616-Computer Software Purchases.
(See CSOP 39.0 Computer Software)
Capitalizing Modular Furniture:
Modular Furniture is normally purchased in individual pieces on separate line items and then configured to make furniture. The normal practice will be to capitalize only those line items that meet the capitalization threshold.
An exception can be made for organizations that want to capitalize modular furniture individual components under the $5,000 threshold. The individual components must create a furniture configuration for a given room location, and in total meet the $5,000 capitalization threshold. If the organization wants to capitalize modular furniture, each line item must be assigned a capital object code. The organization must also indicate how many system assets (furniture) they expect to be created, and the location of each system asset. This information can be communicated to the Capital Asset Management Office using the Capital Asset Information Collection Document. See section on "Purchasing a System."
If no details are provided a General Error Correction will be processed to move the expense to a supplies and expense object code.
The organization will be responsible for inventorying the modular furniture assets. If the modular furniture asset is at some point reconfigured and components are surplused please contact Campus Capital Asset Office personnel to separate the components that are surplused to retire the asset(s). If the purchase order has been archived and is not accessible or the organization is unable to determine the line item cost of the components the organization may provide the Campus Capital Asset Office with a percentage of the cost to separate and retire. The modular furniture asset will remain as an active asset as long as the remaining cost meets the capitalization threshold
Any furniture items that are not modular and do not meet the capitalization threshold will be expensed as supplies and expense. Example a conference table costing $4,000.00 would not be capitalized.
Mass purchases of furniture are not capitalized. For example, on a purchase of 100 beds with a unit cost of $700.00, the $7,000 total cost will be expensed.
- Preparation of Requisition for Capital Equipment
When entering a requisition of moveable equipment in EPIC, enter the moveable equipment in the Items tab and select Edit. In the Line Item 1-CAMS section select CAMS Tran Type.
CAMS Tran Type
The CAMS Tran Type has four options (New, Modify Existing, Fabrication, and Capital Lease) available for capital equipment purchases. The CAMS Tran Type of Capital Lease is only presented as an option when Type of Recurring Payment is selected from the Payment Info tab.
New
Select the CAMS Tran Type of New when the organization is purchasing a new capital asset. The transaction type of New will indicate to the Capital Asset Management Office that invoices should create new asset(s) in the university asset database. When line items will be added together to create a system asset, each of these line items should also be assigned the New CAMS Tran Type.
Modify Existing
The transaction type of Modify Existing is used to communicate to the Capital Asset Management Office that the line item purchased is a component of an existing asset. An existing asset is an asset that has been previously created from another invoice or purchase order and currently exists in the university asset database. The best test to determine if the organization will need to select Modify Existing is to ask, 'Will this line item be added to another PO or invoice that has been posted to the general ledger?'
Business Rules for Modify Existing:
- When components are added to an existing asset, the asset becomes a system. A system is defined as items that work together to perform one function.
- In order to capitalize a new component as part of the existing asset, the following criteria must be met:
The cost of the new component must be $1,000 or more and it must increase the capacity or operating efficiency or extend the useful life of the asset.
A component can only be added to an existing asset that was purchased in the current fiscal year. If a component with a cost of $5,000 or more will be added to an existing asset purchased in a prior fiscal year, use CAMS Tran Type of New. If a component with a cost under $5,000 will be added to an existing asset purchased in a prior fiscal year it will be expensed.
- When a component of a system is $5000 or more and the life of the component differs from that of the existing asset the component should be created as its own asset. Use CAMS Transaction Type of "New".
- The existing asset should be reviewed to ensure the asset category (i.e., moveable, fabrication) matches that of the purchased component to be applied.
When selecting Modify Existing, the asset number the line items will be added to will need to be supplied. (See Finding a Capital Asset Number in FIS) Use the Asset Number 1 field to enter the existing asset number. If the number of assets is greater than one you can use the add asset number button to insert more asset number lines.
Finding a Capital Asset Number in the FIS
To find an asset number, use the Financial Information System (FIS) Capital Asset Maintenance Screen.
After logging into FIS, select Enter TP Documents. Select CAMS Maintenance (wrench & hammer). On the main lookup screen searches can be made by Asset Number, IU Tag Number, Owner COA/Account, Asset Type, Manufacturer, Condition, or PO
The Search button will initiate the search.
Following is a listing of moveable equipment and art object codes:
| Object Code |
Description |
| 7000 |
Capital Equipment |
| 7015 |
Computer Equipment |
| 7030 |
Capital Equipment - Federally Funded |
| 7031 |
Capital Equipment - Federally Owned |
| 7032 |
Capital Equipment - Non-IU or Fed Owned |
| 7035 |
Computer Equipment - Federally Funded |
| 7036 |
Computer Equipment - Federally Owned |
| 7600 |
Art & Museum Objects |
| 7070 |
Trade-in Capital Equipment |
A federally funded object code should be used when a contract and grant account is coded with a federal sub-fund (FEDER).
A federally owned object code should be used when the granting agency holds title to the asset.
Software is considered an intangible (non-moveable) asset. However, units will be required to inventory software to ensure that the software is still in use. When the software is no longer in use the asset should be retired.
Following is a listing of software object codes:
| Object Code |
Description |
| 7261 |
Intangibles University Funded |
| 7262 |
Intangibles Federally Funded |
| 7263 |
Intangibles Fed/Other Owned |
Fabrication
The term Fabrication is used in conjunction with moveable equipment and should not be confused with building construction projects. The transaction type of Fabrication identifies payments as construction in progress. A fabrication is a moveable asset created (built) by a university organization. The organization must first submit a Fabrication Request document prior to any purchases. This document is created in FIS. Once the Fabrication Request document is created, an asset number will be automatically generated.
When a requisition for the Fabrication is being issued in EPIC, and a CAMS Tran Type of Fabrication is selected, the Fabrication asset number previously generated from FIS will be required in the Asset Number 1 field.
Following is a listing of fabrication capital object codes:
| Object Code |
Description |
| 7500 |
Capital Equipment-University Constructed |
| 7530 |
Capital Equipment-Univ. Const. Federally Funded |
| 7531 |
Capital Equipment-Univ. Const-Federally Owned |
| 7532 |
Cap Equip-Univ Const Non IU or Fed Owned |
| 7535 |
Capital Equipment Univ. Const. Computer Equip. Fed Fund |
(See CSOP 12.0 Fabricated Equipment)
Capital Lease
A lease purchase is a contractual agreement conveying the right to use property, plant, or equipment for a stated period of time. A lease agreement involves at least two parties, a lessor and a lessee. The lessor agrees to allow the lessee to use the item for a specified period of time in return for periodic payments. There are two types of lease purchases available; an operating lease and a capital lease.
An operating lease includes a lessor (vendor), who collects rent, and a lessee (the university), who uses the leased equipment and pays periodic rent for such use. The lessee (the university) merely uses the equipment; there is no transfer of ownership, or any risk and benefit of ownership.
A capital lease transfers substantially all of the risk and benefits inherent in ownership of the equipment to the lessee (the university).
A capital lease will require the completion of the Asset Information Collection Document.
Following is a listing of object codes for a capital lease agreement:
| Object Code |
Description |
| 7099 |
Capital Lease |
| 4400 |
Interest |
Services that can be capitalized
Purchasing, Accounts Payable, and Capital Asset Management Offices have worked together to develop the procurement system to allow for the capitalization of services without requiring a quantity. When services are on the organization's requisition, selecting the appropriate CAMS Tran Type will allow the service to be coded as capital. This will allow for incremental invoicing of the service.
Listed below are the service CAMS Tran Types:
- Cost of assembling the asset
- Cost of installation
- In-transit Insurance
- Preparing the site and asset for its intended use
- Training
- Other Service
Freight, Shipping and Handling charges do not have a CAMS Tran Type however they can also be capitalized. Freight, Shipping and Handling are entered as a below the line item and therefore do not require a CAMS Tran Type.
- EPIC CAMS Document
The CAMS Tran Type of New or Capital Lease will require the completion of the EPIC CAMS Document. This document will be routed to the requisition initiator using workflow once the purchase order is approved.
Listed below are the types of acquisitions for capital purchases and the required information for each:
The purchase of individual assets.
When line items will create individual assets the initiator will click on the Individual Asset button. See the section on "Completing the CAMS EPIC Document" for further requirements.
Purchasing line items to create one system.
For the initial purchase of a system, the organization may record line items as capital if the items work together to perform one function and the total cost of the system meets the capitalization requirements. Each of the line items must be necessary for the system to function.
If All of the line items will be added together to create one system, the user will click on the Single System button.
Purchasing line items to create multiple systems.
If Any of the line items will be added together to create multiple system assets the user should select the Multiple System button. The user will be prompted to enter information that communicates how the line items should be grouped together to create the system assets. The EPIC CAMS Document should not be completed until the user knows how the lines should be grouped to create the system assets.
The following information is requested from the department:
- The total number of systems to be created.
- The line items to be added together to create the system.
- A description for the system asset(s), location, and asset type code.
- If the purchase order should be combined with line items from another purchase order(s), indicate the purchase order numbers that will need to be combined.
- Completing the CAMS Document
Individual and One System
The following information is required:
The "Not expected to be received in current FY" should be checked if any of the following conditions exist:
- The equipment will not be received in the current fiscal year, even if the payment is made prior to the end of the fiscal year.
- Equipment has been received, but will not be placed in service prior to the end of the fiscal year.
- When components are purchased to assemble an asset that will not be placed in service prior to the fiscal year end.
Checking this flag and clicking on the update view button will assign the asset type code to 40004 - Moveable assets not yet received, or placed in service. This asset type code identifies the asset as in progress until the equipment is received or placed in service. In process assets will not depreciate. When the equipment is received and/or placed into service and tagged, the University Capital Asset Office will change the create date and assign an asset type code with a depreciable life.
The asset type code of 40004 should only be changed by the University Capital Asset Office.
If the Manufacturer is same as Vendor is yes, the system will assign the Manufacturer. If no, the initiator will need to enter the manufacturer.
Multiple Systems
The following information is required:
- Indicate each of the line items to be added together to create the system asset. The number of system assets should be indicated, if more than one asset should be created.
- A description that describes the system asset for inventory.
- Location of the asset.
Example:
Add three of line one, and three of line two, create 3 assets.
Description: Sony XCCAM HD Camcorder
Location: Campus: BL, Building: BL008, Room: 439
If multiple purchase orders will be combined to create a capital asset a list of the purchase order numbers should be listed.
