Capital Equipment Policy

EFFECTIVE DATE: July 1, 1991 |LAST UPDATED: February 28, 2017 | Policy Section: buying-paying

Responsible Executive

Carolyn Ainslie, vice president for finance and treasurer

Responsible Office

Purchasing

Contact

Jason Knoch, executive director of financial services and strategic initiatives, (609) 258-9181

I. Policy StatementBACK TO TOP

This policy defines capital equipment and outlines related procurement, accounting, and reporting requirements. Each department is accountable for its own capital equipment, including safeguarding, maintaining, and tracking the location and status of individual items of equipment. Accurate maintenance of property records is essential to safeguard assets, ensure compliance with federal regulations, support adequate insurance coverage, and promote efficient use of property.

II. Who is Affected by this PolicyBACK TO TOP

All individuals responsible for purchasing, tracking, safeguarding, maintaining, disposing, and reporting on capital assets.

III. Definitions

Amortize

To extinguish the balance of a fee, loan, or other financial obligation by periodic payments to the creditor.

Betterment and improvement

A modification or addition to capital equipment that costs more than $5,000, increases the equipment’s capabilities or productivity, and extends its useful life by more than one year.

Capital Equipment

An article of nonexpendable, tangible property having a useful life of more than one year, and an acquisition cost of $5,000 or more per unit.

Capital cost

The net invoice price of the equipment plus expenditures necessary to place it into operation, including taxes, duty, transit insurance, freight, and installation.

Capitalize

To record an expenditure as the cost of an asset, where the expenditure (such as refurbishing a machine to extend its useful life) yields benefits over a period longer than one year.

Initial Complement of Equipment

Accounting convention that allows the capitalization of a large number of smaller items of tangible personal property that has a useful life of more than one year.

Maintenance

The regular activity needed to keep equipment in normal or expected operating condition; maintenance is not a capital cost

Repair

The reactive measure to restore normal production capacity and operation for expected service life of equipment; a repair does not extend the expected useful life or change the function of the equipment and so is not a capital cost.

Amortize

To extinguish the balance of a fee, loan, or other financial obligation by periodic payments to the creditor.

Betterment and improvement

A modification or addition to capital equipment that costs more than $5,000, increases the equipment’s capabilities or productivity, and extends its useful life by more than one year.

Capital Equipment

An article of nonexpendable, tangible property having a useful life of more than one year, and an acquisition cost of $5,000 or more per unit.

Capital cost

The net invoice price of the equipment plus expenditures necessary to place it into operation, including taxes, duty, transit insurance, freight, and installation.

Capitalize

To record an expenditure as the cost of an asset, where the expenditure (such as refurbishing a machine to extend its useful life) yields benefits over a period longer than one year.

Facilities and Administrative (F&A) Rate

The rate negotiated with the federal government that is charged to sponsored research awards in order to recover the allowable F&A (overhead) costs associated with conducting organized research; often referred to as (and synonymous with) the indirect cost rate.

Initial Complement of Equipment

Accounting convention that allows the capitalization of a large number of smaller items of tangible personal property that has a useful life of more than one year.

Maintenance

The regular activity needed to keep equipment in normal or expected operating condition; maintenance is not a capital cost

Repair

The reactive measure to restore normal production capacity and operation for expected service life of equipment; a repair does not extend the expected useful life or change the function of the equipment and so is not a capital cost.

IV. PolicyBACK TO TOP

CAPITAL EQUIPMENT

The University follows the Office of Management and Budget definition of capital equipment as “an article of nonexpendable, tangible personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.”

ACQUISITION

Capital equipment is purchased in compliance with standard purchasing policies and procedures as prescribed by Procurement Services. For equipment purchased from sponsored research funds, the Department Administrator and Principal Investigator (PI) are responsible for ensuring compliance with sponsor agreements.

Equipment purchases on a Sponsored Research Project within 90 days of award expiration are normally not allowable unless a justification is given by the PI, such as:

  • The purchase is necessary to complete the research.
  • If the PI is expecting the project to be extended. The department must designate a non-sponsored chartstring that would be used to cover the cost in the event the funding does not materialize.

Cost that should be capitalized with the equipment:

  • Any initial modifications, attachments, accessories, or auxiliary apparatus that are necessary to make an item of capital equipment useable for its acquired purpose
  • Shipping charges, protective in-transit insurance, freight, and installation costs
  • Betterments or improvements as defined above.

Cost that should NOT be capitalized with the equipment:

  • Equipment repair costs 
  • Separate warranty costs or maintenance contracts
  • Demolishing or dismantling costs
  • Spare or replacement parts

Software

Operating and communication software should be capitalized when purchased with a computer. Subsequent or separate purchases of software may be capitalized based on the Software Cost Policy. If the software is funded from sponsored research, it must be expensed unless it has an alternative use at the conclusion of the research.

Aggregated Items

The accounting convention called “initial complement of equipment” allows the capitalization of a large number of smaller items of tangible personal property which would have a useful life of more than one year. This might be applied when a portion of a building is being refurbished and some of the new furnishings cost less than $5,000 each, but more than $5,000 in the aggregate. Consult with the Controller’s Office to determine the appropriate capitalization of these items.

Fabricated Equipment

Fabricated equipment constitutes equipment that cannot be acquired “off the shelf” but must be fabricated from individual components. For more information see: Fabricated Equipment Policy

AMORTIZING EQUIPMENT OVER $5,000

Equipment can be amortized and recovered over time from departmental operating funds in certain cases. Such items would typically include:

  • Servers or other specialized computing equipment
  • Computing and similar electronic office equipment
  • Vehicles required for departmental operations
  • Equipment used by central University service departments that recover their costs

The request to amortize should be submitted to the Controller’s Office prior to entering the requisition. If approved, the requisition must be made against fund A0027. Consult the Controller’s office for further guidance on the entries required thereafter.

CAPITAL EQUIPMENT RECORDS
The University requires all capital asset records to be properly maintained. The Office of Finance and Treasury uses an asset management program to track the capital assets. Departments are responsible for tagging all capital equipment with bar coded tags provided by Procurement Services. Departments are responsible for providing Procurement Services with relevant information about the asset including model number, serial number, location, and other details. Departments are also responsible for notifying Procurement Services of relevant maintenance records, equipment condition, and location, including items that have been transferred to other institutions or items that have been sold or disposed.

At least every two years a physical inventory of capital equipment is performed by the Office of Finance and Treasury to verify the accuracy of inventory records.

LOST, STOLEN, OR DAMAGED PROPERTY AND EQUIPMENT
Departments must report all incidents resulting in equipment loss, damage, or destruction to   Public Safety. Departments must notify Procurement Services so that equipment records can be updated. If the equipment was purchased on sponsored funds, the principal investigator must also follow sponsor instructions for reporting lost, missing, stolen, or damaged property to the sponsoring organization.

DISPOSAL, SALE, OR TRANSFER
The University owns the property title to all equipment, unless specifically stated otherwise in the applicable sponsored award terms and conditions. All sales of equipment must be coordinated through the Facilities Surplus Program .

Equipment purchased on sponsored funds cannot be sold, discarded, or transferred without consent of ORPA. The Department must contact ORPA to initiate the sale or disposal of equipment purchased on sponsored funds. ORPA will confirm if the University has title and if any special conditions apply to the disposal or sale of the equipment.

If a Principal Investigator transfers from the University to a new institution and wishes to transfer capital equipment items, the Department must contact ORPA to initiate the Procedure for Transferring Capital Equipment from Princeton . The Surplus Department will assist in establishing the fair market value of any items to be sold to the new institution.

V. Procedures BACK TO TOP

VI. Forms BACK TO TOP

VII. Contact Roles and Responsibilities BACK TO TOP

VIII. Update Log BACK TO TOP

2/28/17

Updated to align with current business practices and our Prime systems implementation.

10/28/13

Added clarification regarding notifications in the event of lost, stolen, or damaged property.

3/22/13

Changed required physical inventory to once every two years (formerly once every three years).

11/28/12

Targeted updates to sections “Acquisition” and “Accounting: Government Sponsored Research” to clarify PI and Department responsibility for compliance with sponsored research terms. Vouchers are no longer circulated to ORPA, but ORPA is available for consultation.

3/7/12

New procedure "Transferring Equipment from the University" replaces old procedure "Procedures when Professors/Researchers leave the University and want to take equipment with them"; deleted VALUATION OF EQUIPMENT FOR DEPARTING FACULTY section and incorporated into new procedure.

2/25/11

No change to policy or substance; revised organization and language for web-based policy library.

7/1/91

Approved


 

CONTACT US

finance@princeton.edu
Tel (609) 258-3080
Fax (609) 258-0442

Princeton University
Office of Finance & Treasury
701 Carnegie Center
Princeton, NJ 08540

Google Map
Princeton Shuttle

FINANCIAL SERVICE CENTER

7 New South
Tel (609) 258-3080
Fax (609) 258-5040
Open Monday through Friday,
8:45 am — 5:00 pm

SERVICES INCLUDE

Customer service, cashiering,
check pick-up, financial system access

FINANCE NEWSLETTER

The General Ledger is your link to updates on people, policies, and other information related to financial transactions at the University.

Download Current Issue
Download Past Issues
Subscribe

WE WANT YOUR FEEDBACK!

How can we better serve you? Submit comments, questions, and ideas to our customer service department.

finance@princeton.edu