Financial Rep Meeting July 13, 2011

PROPERTY CAPITALIZATION THRESHOLD CHANGE MICHAEL WILLIAMS

What is the change? Current Definition of a Capital Asset – Tangible personal property which has an acquisition value of $1,000 or more with an expected useful life of one year or more. Effective July 1, 2011 the acquisition threshold increased to $5,000.

To what types of property does this apply? Includes: ◦ Tangible personal property, e.g.  Furniture & equipment  Artwork and historical treasures  Motor vehicles and watercraft  Musical instruments  Software (on a per-user basis) ◦ Additions, improvements and other outlays that significantly extend the useful life of an asset Excludes: ◦ Library materials and books ($250 capitalization threshold) ◦ Buildings ($100K) ◦ Internally generated intangibles, e.g. Software ($1 million)

What is the implementation plan? Purchase Orders created prior to July 1, 2011 ◦ Property with a cost of $1,000-$4,999 with an asset profile attached will be corrected when the voucher is created. ◦ Property Accounting Services will monitor this process. ◦ Departmental Managers should review their ledgers and notify PAS if they discover a capitalized asset with a cost less than $5K. Indirect Cost ◦ Sponsored project purchases of property with a cost of $1,000-$4,999 will not incur F&A overhead charges for FY ◦ All grant proposals should continue to use a $1K capitalization threshold for equipment budgets for FY12. Budget ◦ Budget Managers should take threshold change into account when budgeting for OCO expenditures in FY12.

What is the implementation plan? (cont.) Property Management ◦ Property with a cost less than $5K received on or after July 1, 2011 will not be tagged, tracked or physically inventoried. ◦ Previously received property with an acquisition value less than $5K will be exempt from physical inventory. ◦ Departments will continue to be held accountable for property below the $5K threshold. ◦ Contact Property Accounting Services for assistance in tracking these items. Financial Reporting ◦ GL Account and Purchasing Category descriptions have been updated to remove references to old capitalization threshold of $1,000 ◦ Property capitalized prior to July 1, 2011 with a unit value under $5K will be retired and removed from inventory records in FY12.

Contacts Budget – Katie Martindale ◦ ◦ Property Inventory – Julie Bickford ◦ ◦ Purchasing – Karen Gibson ◦ ◦ Sponsored Projects – Roberta McManus ◦ ◦ Accounting – Donna Jarriel ◦ ◦