HBP Part 2.2.9. Investment in Plant--39-Accounts

Handbook of Business Procedures

Date published: July 14, 2009
Last revised: July 14, 2009
Issued by: Financial Accounting and Reporting


A. Purpose

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.

B. Source of Funds

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.

C. Terminology

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.


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Part 2. Fund Accounting - Table of Contents