This policy applies to faculty and staff with responsibility for purchasing, maintaining or disposing of Fixed Assets, including Department Chairs, Department Heads, and Principal Investigators, as well as central administrative offices.
It is necessary for DIU to safeguard and maintain its Fixed Assets in order to receive the maximum benefit from those assets, to comply with DIU’s requirements regarding the use and disposition of Fixed Assets, and to properly account for its Fixed Assets for financial reporting purposes.
Acquiring and Financing Fixed Assets
The University capitalizes purchases of tangible personal property with a useful life greater than five years. Property not meeting these requirements will not be recorded in Banner as a Fixed Asset and will be expended in the current accounting period (with the exception of library books which are capitalized as a group each year). All capital equipment must be identified with a fixed asset tag, which is provided by Financial Operations upon completion of a Fixed Asset Inventory Sheet.
Major renovation projects are tracked in Banner by the use of a designated fund (for multi-year projects). All completed projects over Tk. 40,00,000/- will be capitalized as a project, as opposed to individual assets (equipment, furniture, etc.). Items purchased after the project has been capitalized are considered individually for capitalization. At year-end, any incomplete projects above the capitalization threshold (or expected to be above the threshold when completed) are added to the Construction in Progress Fixed Asset account. Projects not meeting this threshold will be expended.
The basis for accounting for property, plant and equipment is cost. All normal expenditures incurred in preparing an asset for its intended use are part of its cost. The following information provides examples of specific costs for individual categories of assets:
• Tangible personal property – Tangible personal property includes furniture, equipment and vehicles, as well as computers, library books and the DIU’s rare works collection.
o Furniture and furnishings include such items as desks, workstations, cabinetry, safes, tables, showcases and other fixtures
o Equipment includes construction equipment and maintenance equipment such as lawnmowers, snow blowers, power tools, generators, machine shop equipment and custodial equipment in addition to items such as printers, copiers, video, audio, telephone, scientific, clinical and laboratory equipment
o Vehicles include cars, vans, trucks and any other maintenance vehicles on campus.
o Computers include hardware, software, infrastructure and peripherals
o Library includes books, periodicals, standing orders and journals. Library books and periodicals are capitalized as a group at their purchase price plus transportation and any incidental costs
o Rare works include works of art, historical treasures and similar assets defined as “collections.” Rare works are carried at the fair value of the collection items at the date of the gift and are not depreciated. The University uses the proceeds from sales of collection items (if any) to acquire other collection items.
The cost of tangible personal property should include the following:
o Invoice price
o In-transit insurance
o Other costs associated with modifications, attachments, etc. to make property usable for its intended purpose
• Land and land improvements – A purchase involving the acquisition of both land and buildings requires that the cost be allocated between the assets. Land improvements (including infrastructure) are physical changes to land that increase the utility of the land, including – landscaping, paving, roads, curbing, sidewalks, fences, retaining walls, drainage facilities, running tracks, basketball courts, artificial turf, parking lots, outdoor lighting and utility distribution systems.
The cost of land and land improvements should include the following:
o Purchase price
o Professional services
o Title insurance
o Title searches
o Broker’s fees
o Closing costs
o Other costs to prepare land for its intended use (razing and removal and other improvements/landscaping if used as a building site)
• Buildings and improvements – Buildings are structures erected to stand more or less permanently and are designed for human use and occupancy or as shelter for animals or goods. Each structure is comprised of components such as framing, interior finish, roof structure and cover, and building service systems (plumbing, sewerage, HVAC, lighting, power, elevators, fire protection, public address systems, emergency power systems, etc.) which are included in the asset cost.
Building improvements represent improvements or enhancements which extend the useful life of the building. This includes additions, roof replacement, installation of elevators, replacement of HVAC systems, installation of fire protection systems, replacement of plumbing and wiring, and other major renovations. Work to maintain
Buildings and building improvements in existing condition, such as painting or repairs, should be expended.
• Leases and leasehold improvements – Each new lease is reviewed in accordance with Generally Accepted Accounting Principles to determine the proper classification as operating or capital. For capital leases, the amount capitalized represents the lesser of the present value of future minimum lease payments or the fair market value of the leased property.
• The capitalized costs of leasehold improvements are all costs associated with structural alterations, renovation or improvements made by the lessee to leased real property. The elements of the cost of leasehold improvements should follow the methodology used for building improvements.
• Donated assets – Donated property, plant or equipment that meet the requirements for acceptance and capitalization will be capitalized at the market or appraised value of the donation.
• Costs that neither significantly add to the permanent value of a property nor prolong its intended useful life are expended. The following types of plant costs are typically expended:
• Maintenance – costs associated with recurring work required to preserve or restore an asset for its intended use. Maintenance includes work done to prevent damage to a facility (e.g. custodial services, repainting a room, fixing a leaky faucet).
• Costs below capitalization thresholds – Items below the capitalization thresholds noted above should be expended in the period incurred.