Capitalization Procedures
Administrative Procedure 2.302
Fixed assets are assets with an estimated useful life in excess of three years that fit into the cost criterion below. The following capitalization threshold will apply when determining the capitalization of an asset. Assets that are capitalized will be tagged for tracking and depreciated.
| Capital Asset Category | Capitalization Threshold |
|---|---|
| Equipment | $5,000 |
| O&M Equipment | $5,000 |
| Vehicles | $5,000 |
| Computer Equipment, Peripherals, and Software | $5,000 |
| Furniture and Fixtures | $5,000 |
| Site Improvements | $50,000 |
| Building Improvements | $50,000 |
| Buildings | $100,000 |
** Equipment purchased with grant funds in excess of $500 per unit are to be tracked in the Asset Tracking System. Grant items will be capitalized in accordance with the thresholds listed above.
Cost, or basis, includes freight or shipping charges, installation, and testing fees. The basis of real property also includes certain fees and charges paid in addition to the purchase price (legal and recording fees, survey charges, owner’s title insurance, sales commissions). If the asset is constructed or built, all direct costs and an allocable part of most indirect costs incurred may be capitalized as well. The basis will be reduced by the book value of any trade-in.
Depreciation is the annual expense that allows you to allocate the cost or basis of certain property over the time you use the property. It is meant to spread the cost of an asset over its estimated useful life, matching the cost to the revenue derived from that asset.
Asset categories and depreciable (estimated useful) lives are as follows:
| Category | Depreciable (Useful) Life |
|---|---|
| Land | Not depreciated |
| Land Improvements (1) | Not depreciated |
| Site Improvements (2) | 10 years |
| Buildings | 50 years |
| Building Improvements | Specified number of years based on improvement |
| Vehicles | 10 years |
| Equipment | 8 to 15 years |
| Furniture | 8 years |
| Fixtures (3) | 8 to 15 years |
| O&M Equipment | 10 to 25 years |
| Computer Equipment and Peripherals | 5 to 10 years |
| Software | 3 years |
| Other Fixed Assets | Various, depends on asset |
- Clearing, Grading, Utility Installation
- Roads, Street and Parking Lot Lighting, Co-Generation, Pathways and Sidewalks, Parking Lots, Fencing, Landscaping
- Fixtures may include audio/visual equipment, lighting, ventilation hoods, walk in coolers, built in furniture units, lockers, etc.
Averaging conventions establish when the depreciation period begins and ends. The College has elected to take a full year’s depreciation in the year the property is placed in service, and a full year’s depreciation in each of the subsequent years of the property’s remaining depreciable life.
Salvage value is the estimated fair value of a capital asset remaining at the end of its estimated useful life. All assets will be given a zero salvage value given the related costs of disposal.
Library books, for asset and depreciation purposes, will be expensed.
Intangible assets, such as leased assets, will be recorded as needed with any long-term lease that meets the definition of a liability.
Donated Assets will be accounted for as any purchased asset and valued at fair market value at the time of receipt.
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