CAPITAL ASSETS                                                                     Click here for printable version
April 16, 2004
Approved by VP Bob Gallager and Peggy Lucke 4/29/04

POLICY: The University of North Dakota has a significant investment in capital
assets. Capital assets represent a large percentage of total University
assets. Capital assets include land, land improvements and infrastructure,
buildings, building additions, library books and periodicals, and
equipment. Capital assets can be acquired through purchase, gift or
bequest, or fabrication.

PROCEDURES: Asset Management is responsible for the accounting and reporting of
all capital assets. The responsibility includes assisting departments in tagging major
equipment, coordinating annual physical inventories of major equipment, gathering
departmental minor equipment values for insurance, and calculating annual depreciation
and loss or gain on disposals.

DEFINITIONS:

CAPITAL ASSET
• Equipment with an acquisition cost greater than or equal to $5,000 AND
having a useful life beyond one year. These items will have an equipment tag and
number. Depreciation lives for equipment range from 4 to 12 years. The TCCs
used for equipment are 631, 637, 638, 720 and 883. See TCC description for
detailed description of each TCC. PeopleSoft (PS) accounts: 691005, 691010,
691015, 691025, 691030, 691035, 691040, 693005, 693015, 693020, and 693025.
• Equipment enhancements costing greater than or equal to $5,000 AND a
useful life beyond one year. The $5,000 limit applies to each item within the
enhancement, not a combination of items totaling $5,000. The cost of the
equipment enhancements are added to existing tag numbers and depreciated over
the remaining useful life. Depreciation lives for equipment enhancements will
match the remaining life assigned to the original piece of equipment (4 to 12
years). The TCCs used for equipment are 631, 637, 638, 720 and 883. See TCC
description for detailed description of each TCC. PS accounts: 691005, 691010,
691015, 691025, 691030, 691035, 691040, 693005, 693015, 693020, and 693025.
• Equipment fabrications costing greater than or equal to $5,000 AND have a
useful life beyond one year. Departments fabricating equipment are required to
fill out an “Equipment Fabrication” form for Asset Management. The form is
available at the Accounting Services website under Asset Management
http://www.und.edu/dept/accounts/. The form requires information such as: type
of equipment being fabricated, estimated time of completion, and estimated cost.
Once the equipment form is completed, a tag will be assigned for tracking
purposes. When the equipment fabrication is complete, a “Notice of Completion”
form should be filled out by the department and sent to Asset Management
(http://www.und.edu/dept/accounts/). At the time of completion, the equipment
will be depreciated over a range from 4 to 12 years. The TCC used for equipment
fabrication is 606. See TCC description for the detailed description. PS account:
691020
• Land acquired by purchase, gift or bequest or otherwise acquired is included in
the accounting records. When land is purchased, the valuation includes the
amount paid for the land itself and all costs incidental to its acquisition, such as
legal expenses. The valuation also includes broker’s fees and expenses incurred
in preparing the land for use, such as building demolition and grading. When
acquired by gift or bequest, the land is recorded at fair market value at the date of
acquisition. An independent professional appraisal is considered appropriate for
establishing the valuation of land and buildings acquired by gift or bequest. Land
is not depreciated. The TCCs used for Land are 050 and 701. PS account:
682060
• Land improvement and infrastructure costing more than $10,000 AND
extends life AND significantly increases value such as streets, roads, bridges,
pavements, landscaping, utility distribution systems, cabling and networking
between buildings. The valuation method is the same for land and buildings. The
TCCs used for land improvement and infrastructure are 701-710. See TCC
description for detailed description of each. The depreciation life is 50 years. PS
account: 682060
• All Buildings and Building improvements and additions costing more than
$10,000 AND that extend life AND significantly increase value are
capitalized. Significant alterations, structural changes, extraordinary repairs and
replacements or betterments that increase the usefulness, efficiency or life of an
existing building are considered building improvements and additions. When
buildings are purchased or acquired by gift or bequest, the valuation method to be
utilized is the same as that for land. Care should be taken to allocate all elements
of related cost proportionately between the buildings and the land.
When buildings are constructed, all identifiable direct costs are included, such as
payments for insurance and interest during the construction period. If the
building is constructed by the institution’s own labor forces, the cost should
include properly allocated overhead or indirect costs.
The depreciable life for all new building and capitalized improvements is 50
years. The TCCs used for building and building improvements and additions are
636, 884, 702, 703, 704, 705, 706, 707, 710 and 725. See TCC description for
detailed description of each. PS accounts: 682005, 682020, 682030, 682040,
682050, and 682100.

DEPRECIATION
• Depreciation on equipment is calculated annually in the Asset Management
system based upon the month the equipment is placed in service. At year-end,
the depreciation for that fiscal year is booked to the general ledger.
Depreciation on building improvements and infrastructure is calculated for a
full year regardless of the month that the asset is placed in service. At yearend
the depreciation for the fiscal year is booked to the general ledger.

EXPENDABLE ASSET
• Equipment costing LESS than $5,000 (including original purchase, future
enhancements and fabrications). The TCC’s used for non-capitalized expenditures
are 479, 495, 718, and 880. See TCC descriptions for more details. PS accounts:
551005, 551020, 551025, 551030, 551035, 552010, 552005, 552015, 552020,
552025, 552030, 552035, and 552095.
• Buildings, building improvements and additions, and land improvement
and infrastructure costing less than $10,000 or expenditures that are a repair or
replacement to maintain existing condition. The TCC’s used for non-capitalized
expenditures are 471, 711 and 876. PS accounts: 591105, 591095, 682010,
682025, 682035, 682045, 682055, 682065, 682095, and 682105.

EXAMPLES:

CAPITAL ASSETS
Equipment – equipment costing greater than $5,000, computer equipment,
research and scientific equipment, vehicles, aircraft, etc.
Enhancements – adding an additional (not replacing) hard drive to a computer
and the hard drive purchase price is more than $5,000, a $6,000 antenna for radar
equipment that is already tagged.
Fabrications – purchases over 12 months, which in total create one piece of
equipment costing greater than $5,000, i.e., building a combustion furnace.
Land Improvements and Infrastructure – new parking lot, new cabling and
networking between buildings.
Building Improvements and Additions - library shelving attached and cemented
to floor, new elevator, new air conditioning system, new fire alarm or security
systems, new storm windows, replace major building system.

EXPENDABLE ASSETS
Equipment – any equipment less than or equal to $5,000.
Enhancements – replace a part costing more than $5,000 but the piece of
equipment no longer works unless this part is installed.
Fabrications – a fabrication that does not meet the $5,000 threshold.
Land Improvements and Infrastructure – re-surface parking lot, light posts,
signs under $10,000.
Building Improvements and Additions – remodeling, tuck pointing, interior
remodeling, glass replacement, roof repair, window repair, updating wiring and
cabling, bringing a building up to code, repair existing elevator, air conditioning
units in windows.

REFERENCES:
North Dakota Century Code 44-04-07 requires each institution to maintain a record of
equipment.
North Dakota Century Code 54-27-21 requires the capitalization of equipment acquired
for more than $5,000.