INVENTORY CONTROL POLICIES AND PROCEDURES
3. Real Property
3.1 Plant Assets
Records of expenditures for plant
assets as classified below shall be maintained by the Business Office to
determine the amount of funds "Invested In
Plant" for the University.
3.2
Additions and Improvements to Land and Buildings
Additions and improvements valued
at or above $50,000 should be capitalized if the expenditures meet the criteria
listed below. Additions and improvements less than $50,000 should be treated as
repairs and maintenance even though they have the characteristics of
capitalized expenditures. All doubtful cases as to the expected benefits of the
addition or improvement should also be expensed.
3.2.1 Additions - An addition
consists of a new unit or the extension, expansion or enlargement of an
existing asset. An addition results in an increase in quantity.
3.2.2 Improvements - A
substitution that increases the quality of an asset. An improvement results in: (a) an increase in
the useful life of the asset beyond the original estimate; or (b) an increase
in its operating efficiency or capacity. Alterations that modernize rather than
improve the quality of the asset should be expensed unless the alteration is so
extensive as to increase the estimated life of the asset.
Land improvements are functional
and cosmetic improvements that ready land for its intended use. Examples include, but are not limited to,
site improvements such as landscaping (including shrubbery, flowers, trees), retaining walls, parking lots, fencing, sidewalks,
sculptures and artwork. Land
improvements are normally depreciated over a useful life of twenty (20) years.
Leasehold improvements include, but
are not limited to, the construction of new buildings and reconstruction and
improvement of existing buildings. If
option to renew lease for additional years is uncertain or the likelihood of
renewal is uncertain, the leasehold improvements are generally depreciated over
the lesser of the original term of the lease or useful life of the asset.
Re-roofing costs should not be
capitalized unless they are part of a major renovation of a building. Asbestos removal costs that can be identified
should be expensed.
3.3 Land
Land is a non-depreciable asset
with costs that directly relate to the land's unlimited life.
All land acquired by the University
should be recorded at its purchase price, including not only the contract
amount but also all other costs relative to its acquisition. Related costs
include costs incurred in closing such as title to the land, attorney's fees
and recording fees; costs incurred in getting the land in condition for its
intended use, such as excavation, grading, filling, draining and clearing;
assumption of any liens, mortgages or encumbrances on the property; and any
additional land improvements that have an indefinite life. Land acquired through forfeiture should be
capitalized at the total amount of all taxes, liens and other claims
surrendered, plus all other costs incidental to acquiring ownership and
perfecting title.
Land acquired by donation,
or the intent of donation such as acquisitions of one dollar, should be
recorded on the basis of an appraisal of the fair market value at the date of
acquisition. The cost of the appraisal itself,
however, should not be capitalized.
3.4
Buildings
Buildings consist of relatively
permanent structures, including all permanently attached fixtures, machinery
and other appurtenances that cannot be removed without damaging the building or
the item itself, erected for the purpose of sheltering persons or property.
Examples include, but are not limited to such items as academic buildings,
residence halls, apartments and barns.
All buildings valued at or above $100,000 should be capitalized. Buildings valued at less than $100,000 should
be expensed. Buildings are normally
depreciated over a useful life of forty (40) years.
Buildings acquired by purchase
should be capitalized at their total purchase price. This includes the contract
amount, unpaid taxes assumed, legal and closing fees and all expenditures
necessary to place the property into acceptable condition for its intended
use.
Buildings acquired by construction
should be capitalized at their contract price plus all other costs relative to
their acquisition. Included are such items as architectural and engineering
fees, costs of building temporary construction offices, fees for permits and
licenses, easements and allocable overhead, if applicable.
Buildings acquired by donation, or
the intent of donation such as acquisitions of one dollar, should be recorded
on the basis of an appraisal of the fair market value at the date of
acquisition. The cost of the appraisal itself, however, should not be
capitalized.
3.5 Infrastructure
Infrastructure is defined as
improvements related to the skeleton structure and function of the campus. Examples include, but are not limited to,
roads, steam lines, chiller systems, storm sewers, tennis courts, sewer lines,
severe weather systems, athletic scoreboards, turfs, lighting, radio or
television towers, water lines, signage, all-weather track, telecommunications
and computing wiring and energy management systems. Improvements valued at or above $50,000
should be capitalized. Improvements
valued at less than $50,000 should be expensed.
Infrastructure items are normally depreciated over a useful life of
twenty (20) years.
This information is
maintained by Business & Fiscal Affairs
Last Updated: 20-MAR-2008
For more information, contact Business Services
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