HBP Part 10.3.10. Equipment

Handbook of Business Procedures

Date published: June 19, 2012
Last revised: March 29, 2019
Issued by: Federal Reporting

10.3.10. EQUIPMENT

A. General

Only annual depreciation for capital equipment purchases can be included in the calculation of center rates. Capturing equipment replacement and maintenance costs in the rates allows the department or unit to build an amount for equipment replacement and maintenance. For complete policies regarding the treatment of equipment see HBP, part 16, Inventory Control and Property Management.

Centers must transfer equipment replacement and maintenance amounts to the center’s equipment replacement sub-subaccount.

B. Capitalization Threshold

Tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost of $5,000.  Full list of assets and capital thresholds can be found in the State Property Accounting (SPA) Process User’s Guide.

C. Donated Equipment

Donated equipment is considered to be the financial equivalent of a cash donation that is subsequently used to purchase equipment. When a center receives an equipment donation, the equipment may be depreciated as a direct cost of the center. The inventory value of the donated equipment is an appraised or fair market value as provided by the donor.

D. Fabricated Equipment

Equipment fabricated specifically for use in the center costing $5,000 or more is added to the university inventory system and can be depreciated.

  • The center provides Inventory Services with the description and documentation of costs when a capital equipment item has been fabricated.
  • The costs to fabricate the equipment must be $5,000 or more and only include material costs and exclude university labor and fringe benefit costs.

E. Equipment Leases

When equipment used in service operations is leased:

  • Operating lease costs may be included in the rates.
  • For capital leases depreciation may be included in the rates.
  • Interest associated with purchase of such assets (e.g., interest

component of a capital lease) is allowable if interest is paid to an outside third party.

F. Equipment Depreciation

Depreciation-like-amount for equipment may be included in service rates to replace equipment.

  • Applicable to equipment purchased.
  • If equipment is purchased with federal funds or used for cost sharing on federal awards, its depreciation cannot be included in the rate calculations.
  • Only straight-line depreciation may be used (acquisition cost of the equipment divided by its useful life).


           To calculate straight-line depreciation:

​            Acquisition Cost of the Equipment / Useful Life = Straight-line Depreciation Useful Life


  • Acquisition cost includes equipment cost plus applicable taxes, freight, and installation costs to place the asset into intended use.
  • The depreciation schedule is validated in *DEFINE.
  • When billing users, split the income earned between the operating income sub-account and sub-account established to accumulate the amount to be used for equipment replacement

G. Equipment Purchased with General or Departmental Operating Funds

Equipment used by the center, which is purchased with general or departmental operating (nonfederal) funds, can be depreciated in service rates. The department can be reimbursed for the cost of this equipment if:

  • Prior approval is received by Federal Costing.
  • Adequate documentation is developed, maintained, and retained by the center to verify the equipment's original purchase cost, depreciation amounts recovered, etc.
  • Under no circumstances can the nonservice accounts that gave money to or invested in the center be reimbursed for more than the dollar amount given to the center.

H. Sale of Equipment

When equipment originally purchased with center funds is sold, all the proceeds from the sale and any gain or loss is recorded in the center’s equipment reserve account. Refer to the policies regarding the sale of equipment for equipment utilized in a center and purchased with non-center funds.



Part 10. Costing - Table of Contents