CSOP 38.0 Capital Assets Not Expected to be Received in Current FY

SUBJECT:

Capital Assets Not Expected to be Received in Current FY

SOURCE:

Capital Asset Management

ORIGINAL DATE

OF ISSUE:

November 2006

DATE OF

LAST REVISION:

April 2008

CSOP NO:

38.0

RATIONALE:

To provide direction to university departments for the procurement of capital assets not expected to be received in the current fiscal year.

CSOP:

Identifying purchase orders of capital assets not expected to be received in the current fiscal year

Notifying CAMS that a procurement order is not expected to be received in the current fiscal year

Reporting and accounting for capital assets not expected to be received in the current fiscal year


Identifying purchase orders of capital assets not expected to be received in the current fiscal year
Capital assets at Indiana University are held as construction in progress and do not begin depreciating until they are placed into service as fully operational assets.


Capital assets may be purchased and invoiced in the current fiscal year but shipment does not take place until the next fiscal year. The best practice for identifying procurement orders not expected to be received in the current fiscal year is to determine the delivery date. The vendor should be able to provide an anticipated delivery date. If the vendor indicates your procurement order will not be received at IU until after June 30th of the current fiscal year, then the asset will be capitalized as construction in progress.


There are two conditions in which capital assets are held as construction in progress.

  • The equipment will not be received within the current fiscal year, regardless of when payment was made.
  • Equipment has been received, but will not be placed into service.

Examples
A piece of equipment is delivered to IU but can not be installed in its current location due to the need for building modifications to allow for the appropriate use of the equipment.


A piece of equipment is delivered to IU and purchased under a warranty agreement in which the vendor must physically unpack and install the equipment at IU before the warranty is valid.

Notifying CAMS that a procurement order is not expected to be received in the current fiscal year.
Organizations should make a note in the Capital Asset Tab of the Purchase Order if item will not be received in the current fiscal year as identified from the conditions above. Also the use of asset type code 40004 identifies the capital asset as "in progress" until the asset has been received and is fully operational. The University Capital Asset Office uses the 40004 asset type code to generate a report to identify those assets which have not been received. When the capital asset is received and tagged, the University Capital Asset Office will change the create date and assign the appropriate asset type code for that type of equipment at which time the asset will begin depreciating. The asset create date assigned will be the date that the asset was tagged.

Reporting and accounting for capital assets not expected to be received in the current fiscal year.
In accordance with Generally Accepted Accounting Principles, it is required that assets are not depreciated until they have been received and are fully operational. If an organization determines that a capital asset will not be received or will not be fully operational in the current fiscal year, the organization should indicate the reason and the actual or approximate date the asset will be delivered and/or is fully operational on the Org Text line of the asset on the Capital Asset Maintenance screen. The organization should also notify the CAMS Asset Inventory Coordinator that the asset will not be received or will not be fully operational in the current fiscal year.


If an asset has incurred depreciation, but has not been received or is not fully operational, the University Capital Asset Office will retire the original asset and reverse out any related depreciation charges. A new asset will be established with the asset type code 40004.

If depreciation has not been incurred on the asset the University Capital Asset Office will change the asset type code to 40004. When the asset has been tagged the asset type code will be changed back to a depreciable status.

DEFINITIONS:

Capital Equipment- must have an acquisition value of at least $5,000 and a useful life expectancy of one year or more.

Depreciation-The periodic charge to income that results from a systematic and rational allocation of cost over the life of a tangible asset.

Equipment-The term “equipment” includes delivery equipment, office equipment, machinery, furniture and fixtures, factory equipment and similar fixed assets.

CROSS

REFERENCES:

CSOP 8.0 Capitalization of Movable Equipment

RESPONSIBLE

ORGANIZATION:

Organizations that purchase capital assets.