| VOLUME: I |
POLICIES RELATED TO ACCOUNTING ADMINISTRATION |
| SUBJECT: |
Capitalization of Land |
| SOURCE: |
Financial Management Services, American Institute of Certified Public Accountants (AICPA) Guidelines for Colleges and Universities, GAAP
|
| DATE ISSUED: |
July 1992, Revised January 1996 |
| POLICY NO.: |
I-200 |
| RATIONALE: |
To define expenditures which will be classified as land. |
| POLICY: |
All costs incurred in acquiring land should be considered as part of the land cost. These expenditures shall include the purchase price, closing costs, and the assumption of any mortgages or liens. All direct costs incurred in getting the land ready for use shall also be considered as part of the land price. Any other land improvement shall also be considered a land capital expenditure if it increases the utility.
Land purchased with the purpose of constructing a building is capitalized as land. Any costs incurred in getting the land ready for the use will also be considered part of the land, i.e. razing the structure. Benefits received for clearing the land in preparation of building will be considered a reduction
on the price of the land.
|
| DEFINITIONS: |
Closing costs include items such as attorney fees and title updates.
Ready for use is a term that includes grading, clearing, filling and draining.
|
| PROCEDURE REFERENCE: |
In order for an item to be secured as land, the correct object code should be utilized 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 land purchases should be made out of a special land purchase account controlled by the Vice Chancellor for Business on each campus.
|
| CROSS REFERENCE: |
For more detail and definition on this policy, refer to the Indiana University Capital Asset Manual, Accounting for Assets at Indiana University, distributed by the Financial Management Support department.
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| RESPONSIBLE ORGANIZATION: |
Financial Management Services |
