Property Control System Manual (PCS)

Effective: 6/30/2010

Revised:

PCS 101: Plant Acquisitions

Purpose

To outline the accounting classifications of plant acquisitions

Sources

Property Control

Financial Services

Applicability

All university agency/orgs

Policy

Plant acquisitions are divided into four categories:

1. land
2. improvements to land other than buildings
3. buildings

   and

4. fixed property.

Land

1. Acquisition by Purchase. Land purchased by the university is recorded at cost. Cost includes land; legal, title, and broker’s fees; landfill; and clearing, grading, and other costs necessary to prepare the land for its intended use.
2. Acquisition by Gift or Bequest. Recorded at the fair market value at the date of the gift (appraisal usually has been completed).
3. Acquisition through Eminent Domain. Recorded at the amount of the court award made to the landholder(s).

Improvements to Land Other than Buildings

This category consists of land improvements outside the building. Improvements to land other than buildings, which are required to make land ready for its intended use, are capitalized if the total expenditure is $100,000 or more per project.

This category includes roads, walkways, tunnels, utility facilities, drainage systems, landscaping, parking lots, tennis courts, athletic fields, fences, curbs, streetlights, and similar items.

Buildings

1. Buildings. The cost of buildings (permanent structures housing persons and personal property) is the construction cost of the building shell and its components. Examples of construction costs include, but are not limited to, building materials, architects’ fees, building permit fees, subcontract fees, rent for property, other than real property, to complete construction, operating and maintenance costs for property used in the construction, site preparation, compensation for work performed, and cost of supplies consumed in the construction. Capitalization takes place during the completion of the project.
2. Building Components. Building components are items permanently attached to the building shell necessary for the building to be used as intended. Building components are either integral to the building or cannot be removed without damaging the building or component. Examples of building components are plumbing systems, electrical wiring, and air-conditioning duct work.
3. Building Additions. New additions to buildings resulting in additional square footage are capitalized regardless of the dollar threshold.
4. Renovations. Major building component replacements or renovations of a building that extend the original life of the building and/or increase its value to the university are capitalized with the exception of projects involving expenditures of $100,000 or less, which are considered expense.
5. Demolition Costs. The cost of building demolition in preparation of new construction is added to the cost of the new building as “site preparation costs.” If new construction is not planned, the demolition costs are not capitalized.
6. Planning. Professional services and fees incurred with construction and remodeling (e.g., architects’ fees, construction and management fees, and engineering studies).

Fixed Property

Fixed property (building fixtures) includes carpeting, drapes, shades, shelving, bulletin boards, awnings, and lab benches bolted to the floor. (Fixtures must be able to be removed without extensive alterations to the building structure and cannot be so affixed as to be legally considered part of the real property.)

Note:

Although building fixtures are attached to a building structure or interior wall, they are not permanently attached. This means that such items can be removed without costly or extensive alterations to the building structure. Equipment that is permanently attached is classified as other building capital, described below.

Coding Criteria

If $100,000 or More

If the total acquisition cost of the fixture purchase (item[s]) is $100,000 or more, the purchase is coded as a capital acquisition.

If Less than $100,000

If the total acquisition cost of the fixture purchase is less than $100,000, the item is coded as an operational purchase.

Cross-Reference

For information on the use of capital object codes, see the Financial Services Policies and Procedures Manual—FIN 430–01, “Overall Expenditure Coding Structure.”

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