Fixed Asset Policy

This accounting policy establishes the minimum cost that shall be used to determine the capital assets that are to be recorded in Union College’s annual financial statements, which could also have implications for budgeting purposes.

A “capital asset” is defined as a unit of property that: (1) has an economic useful life that extends beyond 12 months, and (2) was acquired or produced for a cost of $5,000 or more. Capital assets must be capitalized and depreciated for financial statement and budgeting purposes.

Any items costing below this amount should be expensed.

To be considered for capitalization, and thus subject to depreciation, an asset must fulfill three characteristics:

1. The asset must be acquired (purchased, gift-in-kind) for use in operations, and not for investment or sale.
2. The asset (per individual unit) must have a useful life of at least one year.
3. The asset (per individual unit) must have a cost value of $5,000 or more.

A group or lot of moveable equipment that in total costs $5,000 or more, but each unit costs less than $5,000, will not be capitalized. Examples of this type of group purchase include, but are not limited to, one lot of furniture or computer workstations where the total cost is $5,000 or more, but the unit cost is less than $5,000.

Expenditures subsequent to initial acquisition may be capitalized. These include the cost for renovations, betterments, or improvements that add to the permanent value of the asset, make the asset better than it was when it was purchased, or extend its life beyond the original useful life. To capitalize these costs, the total subsequent project cost must exceed $5,000 and must fulfill at least one of the following criteria:

• The useful life of the asset is increased.
• The productive capacity of the asset is improved.
• The quality of units/services produced from the asset is enhanced.

The basis for accounting for property, plant, and equipment is cost, which should include the purchase price and all normal expenditures of readying an asset for its intended use.
Examples of costs that should be capitalized are as follows:

• Shipping charges
• Freight
• Installation costs

Examples of costs that should NOT be capitalized are as follows:

• Repair costs
• Separate warranty costs or maintenance contracts
• Replacement parts or spares
• Technical service costs

Costs that are below the $5,000 threshold for capitalization are expensed immediately. In addition, expenditures for repairs, maintenance or replacement of component parts or accessories, which do not extend the asset’s original estimated useful life or significantly enhance its value, are expensed as incurred.

Examples of plant costs that should be expensed are as follows: Custodial services; re-painting; re-carpeting; repairing or replacing damaged building or equipment components.

Please notify the Controller’s Office regarding all lease arrangements (including vehicles, equipment, and facilities) to determine proper accounting treatment.

Donated property, plant, or equipment that meet the requirements for capitalization and that will be used in operations, will be capitalized at the fair market or appraised value on the date of donation. Please notify the Controller’s Office regarding any donated assets.

Many sponsors permit the acquisition of non-expendable, special purpose equipment with project funds, provided the equipment is required in order to perform the project and prior written approval of the awarding agency or pass-through entity is obtained. Acquisition of general purpose equipment is prohibited except with prior written approval of the awarding agency or pass-through entity. All capital equipment purchased from federal funds is the property of the College unless otherwise stipulated in writing by the grant or contract sponsor. The College is bound by the sponsor’s agreement whether or not the ownership is vested in the College.

It is the responsibility of the Principal Investigator (PI) to ascertain the specific requirements of the award and to adhere to Union College's procurement procedures prior to ordering equipment. The PI is also responsible for proper use, maintenance and security of all assigned property, and for notification to the Grants Office or Financial Services, as applicable, of any shortage, damage, loss or theft of property. See the Administering Grant Funds: Financial Management Policy at
https://www.union.edu/grants/policies-and-guides for further information.

Original or replacement equipment acquired in part or its entirety under a federal award must be disposed in accordance with the disposition instructions provided in the original award terms and conditions.

In order to comply with 2 CFR 200.313(e), when equipment acquired under a federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a federal agency, the PI of the federal award through which the equipment was acquired must take the following steps to ensure its compliant disposition:

1. Determine the current fair market value of the equipment (is it $5,000 or less)
2. Contact the Director of College Grants & Sponsored Programs

If the terms and conditions of the award do not include disposition instructions AND the fair market value of the equipment is less than $5,000, the equipment may be sold or otherwise disposed of with no further obligation to the federal awarding agency.

If required by the terms and conditions of the federal award, the PI, in consultation with the Director of College Grants & Sponsored Program, is required to request disposition instruction from the awarding agency and follow them accordingly. If the awarding agency fails to provide the disposition instructions within 120 days, any equipment with a fair market value in excess of $5,000 may be retained or sold. Please note that if the estimated current value exceeds $5,000, there may be additional considerations regarding reimbursement to the federal awarding agency.

Before disposing of equipment acquired through a federal award, regardless of estimated current value, the PI must provide the Office of College Grants & Sponsored Programs with the following information:

• SN# or Model#
• Item description
• Year purchased
• Award no.
• Estimated current value

Except for land, all capitalized assets will be depreciated using a straight-line method over the useful life of the asset category. An asset’s useful life is the period over which services are expected to be rendered by the asset. The calculation of depreciation will be based on historical cost. The following summarizes useful life by category:

All purchased and acquired assets have a useful life and value. When the asset’s usefulness warrants disposal from a department or office, the asset may have value to other departments, individuals, or members within the community. Departments should notify the Finance Department (finance@union.edu) of any assets no longer of use to the department to determine proper disposal procedures.