Handbook of Business Procedures
Date published: July 14, 2009
Last revised: July 14, 2009
Issued by: Financial Accounting and Reporting
2.2.9. INVESTMENT IN PLANT—39-ACCOUNTS
Investment in plant consists of capitalized assets, which include land, new buildings, additions to existing buildings, construction in progress, improvements other than buildings, infrastructure, equipment, library books, museum and art collections, and capital leases. These assets are capitalized in accordance with state and federal guidelines. With the exception of land and other inexhaustible assets, these assets are depreciated over their useful lives. Capital activity from all other fund groups that takes place throughout the fiscal year is recorded to investment in plant at the end of the fiscal year for annual financial report purposes. The report includes asset additions and disposals as well as any corresponding depreciation.
Capital assets are acquired by the university by purchase, gift, trade, or fabrication and are initially recorded within the fund group used for the acquisition. Assets are stated at actual or estimated cost at the date of acquisition.
1. Capital Assets
Capital assets are real or personal property that have an estimated useful life of greater than one year. Capital assets may or may not be capitalized for financial reporting purposes.
2. Capitalized Assets
Asset Type Threshold Land and land improvements Capitalize all Buildings and building improvements $100,000 Facilities and other improvements $100,000 Infrastructure $500,000 Personal Property $5,000 Library books and materials (collections) Capitalize all Works of art and historical treasures Capitalize all Leasehold improvements $100,000 3. Depreciation
Capitalized assets depreciate over their estimated useful lives unless they are inexhaustible. The straight-line depreciation method (historical cost less residual value, divided by useful life) is used. Depreciation data is calculated and reported for each eligible asset.
4. Inexhaustible Assets
Inexhaustible assets do not depreciate. These include land and land improvements, as well as collections or items whose economic benefit or service potential is used up so slowly that the estimated useful lives are extraordinarily long. Because of their cultural, aesthetic, or historical value, holders protect and preserve these assets more than similar assets without such value.
5. Expensed Improvements
The following costs are expensed rather than capitalized and depreciated:
- Those that are below the capitalized threshold.
- Those that do not significantly add to the permanent value of a property and do not prolong its intended useful life.
* Note: Best viewed with Adobe Acrobat Reader 6.0 or later. Earlier versions may result in incomplete rendering of information. A free update of Adobe Acrobat Reader may be obtained from Adobe.