Office of the Vice President for
Administration and Finance
SECTION: FISCAL INDEX: B-8
SUBJECT: ACQUISITION OF CAPITAL EQUIPMENT
All capital equipment with an initial cost of $5,000.00 or greater, regardless of its funding or acquisition source, is to be accounted for through the University's asset management software. When purchasing capital equipment, the department making the purchase is responsible for using the proper accounts on the purchase requisition. The Financial Reporting Manager, Finance Department, will answer any questions as to whether a purchase should be classified as a capital asset.
Capital Assets - Possessions that have a single unit value of $5,000 or greater and an estimated useful life of more than one year. Generally, a capital asset must be self-contained for its primary use and have sufficient size to make its control feasible by means of marking with identification numbers and/or manufacturer's serial numbers. These assets are reported in the University's annual financial report.
Controlled assets - Assets that the State Comptroller's office determines must be secured and tracked due to the nature of the items, between the ranges of $500 and $4,999.99, with an estimated useful life of more than one year. These assets are classified as expendable. For a listing of controlled assets, refer to the Texas State Property Accounting (SPA) Process User's Guide.
Capital equipment is acquired for the University through several sources, including:
- Purchase using any University fund source
- Purchase requisition/purchase order process
- Interdepartmental purchases or Intercampus purchases
- Purchases from on-campus service or auxiliary departments
- Equipment loans from federal, state and private agencies
The department making the purchase initiates a requisition in accordance with purchasing guidelines appropriate to the particular source of funds (i.e., state, grant/contract, etc.). The Purchasing Department issues the purchase order.
Equipment will be recorded at actual cost plus all costs incurred to make the assets usable and render it into service. Expenditures subject to capitalization include freight charges, import duties, handling and storage charges, in-transit insurance charges, site preparation costs, installation charges, charges for testing and preparation for use, cost of reconditioning items purchased used, and parts and labor associated with the construction of the equipment. Incidental charges, such as extended warranties or maintenance agreements are not considered part of the capital costs. However, if such costs are included or imbedded within the capital asset cost, then these costs are considered a part of the acquisition cost of the asset.
GIFTS AND DONATIONS
Property assets which are offered to the University as gifts or donations must be approved by the University Advancement Office, the Vice President for Administration for Finance and the Property Manager. Forms for approval of gifts and donations are available from the University Advancement Office. Gifts and donations must be approved before assets are accepted into the University's possession. Donated property must be recorded at its estimated fair-market value on the date of acquisition, using a reasonable market study/assessment. Once approved, the item will be evaluated for capital or controlled asset treatment based upon the fair-market value.
TITLE TO EQUIPMENT
Title to any equipment purchased by the University is vested in the University and The State of Texas.
Upon completion of a contract or grant paid for with sponsored project funds, title to all property furnished by those awards is transferred to the University immediately, unless the contract or grant provisions specify that title remain with the sponsor or sponsor's designee.
Title to equipment transferred from another government agency or educational institution is vested in the University and the State of Texas unless the University has written notification of other arrangements.
Title to donated equipment is vested in the University and the State of Texas by virtue of the fact that the University of Houston-Victoria is a state agency.
When a department purchases non-maintenance, non-consumable items that enhance the functionality of existing equipment and increase the capital value, the purchase price of the item(s) is considered an "added cost" and capitalized. The modifications, attachments and/or accessories should be permanently installed with a combined value of the original equipment and added cost exceeding $5,000 to qualify for added cost capitalization. If the combined value of the original item and the added cost do not exceed $5,000, the added cost should not be capitalized.
It is possible that the original equipment did not qualify for capitalization when first purchased. When the modification causes the value to exceed $5,000, the entire value (original and added cost) should be capitalized. If a department has any questions concerning capitalization of equipment, use of capital equipment accounts or the purchase of added cost items, please contact the Financial Reporting Manager in the Finance Department.
R. Vic Morgan,Jr., Ph.D.
Next review date: August 2018
Origination: Finance Department