| VOLUME: I |
POLICIES RELATED TO ACCOUNTING ADMINISTRATION |
| SUBJECT: |
Capitalization of Building |
| SOURCE: |
Financial Management Services, American Institute of Certified Public Accountants (AICPA) Guidelines for Colleges and Universities, GAAP
|
| DATE ISSUED: |
July 1992, Revised July 2002 |
| POLICY NO.: |
I-190 |
| RATIONALE: |
To define expenditures which will be classified as new buildings, building additions or major building renovations.
|
| POLICY: |
The cost of the building shall include all direct expenses. Construction costs shall include materials, labor, overhead directly related to the construction, building permits and fees,
i.e. attorney and architecture. Interest on indebtedness related to the building will be capitalized during the construction process.
In order for costs to be capitalized and added to the cost of an existing building, they must meet the following criteria:
- Expenditures per building for alteration or renovation must be at least Seventy-five Thousand
Dollars ($75,000) or twenty percent (20%) of the historical cost of the existing building
at June 30 of the previous year, whichever is lower to be capitalized.
- The improvement must be an attached fixture.
- The expenditure must increase the life or enhance the utilization of the building.
|
| DEFINITIONS: |
An item is an attached fixture if removal of the addition causes major structural damage. |
| PROCEDURE REFERENCE: |
The building should be identified in the account description of the construction account utilizing the correct object on the Purchase Order and disbursement documents.
A list of the current object codes (income and expense classes) is available by contacting your campus Chart Manager (see listing; http://www.fms.indiana.edu/) or the Financial Information System's Object Code References Tables.
All capitalized building projects should be processed through a construction account or renewal and replacement account and should not be recorded in an operating account. Any federal funds used should be allocated to the correct disbursement object code.
|
| CROSS REFERENCE: |
For more detail and definition on this policy, refer to the Indiana University Capital Asset Manual, Accounting for Assets at Indiana University,
URL: http://www.fms.indiana.edu/cams/Manual/Manaul.asp distributed by the Financial Management Services department.
See Accounting Administration Policy I-150, Capitalization of Moveable Equipment.
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| RESPONSIBLE ORGANIZATION: |
Financial Management Services |
