Property Control System Manual (PCS)

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Effective: 6/30/2010

Revised: 4/16/2018

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PCS 101: Plant Acquisitions

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To outline the accounting classifications of plant acquisitions

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Capital Assets Management
Financial Services

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Applies to all university agencies and organizations

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Plant acquisitions are divided into four categories:

  1. Land
  2. Improvements to land other than buildings
  3. Buildings
  4. and

  5. Leasehold Improvements.


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


  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, building permit fees, subcontract fees, rent for property, to complete construction, site preparation, compensation for work performed, and cost of supplies consumed in the construction. Capitalization of associated costs takes place as the costs are incurred.
  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 for projects involving expenditures of $100,000 or more.
  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).
  7. Building Fixtures. 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. Examples include carpeting, shades, shelving, bulletin boards, and lab benches bolted to the floor. These are capitalized if the total expenditure is $100,000 or more, per project.

Leasehold Improvements

A leasehold improvement is an improvement made to real property that Arizona State University does not own, but has the right to use for the term of a lease. The improvement will revert to the lessor at the expiration of the lease. The cost of leasehold improvements over the capitalization threshold of $500,000 and with a noncancellable or otherwise reasonably expected remaining lease term of greater than 3 years should be capitalized.

Leasehold improvements should not include maintenance and repairs done in the normal course of business. Further, moveable equipment or office furniture that is not attached to the leased property is not considered a leasehold improvement.

The cost of leasehold improvement should be depreciated over the shorter of

  1. the remaining lease term, including reasonably expected renewal or extension of the lease,
  2. or

  3. the estimated useful life of the improvement.

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Additional Information

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For information on the use of capital object codes, see the Financial Services, Financial References webpage.

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