Capital Equipment and Inventory Definitions

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ART COLLECTIONS

Art collections are to be considered capital items subject to the guidelines of FPPP #47. They are not considered capital equipment and are out of the scope of this manual.

CAPITAL EQUIPMENT

Any single asset which has an acquisition cost of $5,000 or more and a useful life of at least two years, whether purchased outright, acquired through a capital lease or through donation. It also includes certain constructed or fabricated items and certain component parts. It does not include real property (land), software or library holdings (see FAP - Financial Reporting of Library Holdings (F47).

CAPITAL INVENTORY ENTITY

For the purposes of the Capital Inventory Control System, the following general guides should be used to determine whether or not an item should be considered for entry into the Capital Inventory System. If there is any doubt as to the status of an item, Financial Policy and Procedure Paper (FPPP) #33 [FPPP 33] should be consulted for final determination.

CAPITAL LEASE

A lease is defined as an agreement conveying the right to use property or equipment for a specified period of time. Actual title to the property is not transferred to the lessee. A lease agreement must be evaluated to determine whether the transaction should be treated as a capital lease, an operating lease or a rental expense. If at its inception a non cancelable lease meets one or more of the following criteria, the lease must be classified and accounted for as a capital lease:

  1. The lease transfers ownership to the lessee by the end of the lease term.
  2. The lease contains a bargain purchase option (a provision allowing the university, at its option, to purchase the leased property for a price, which is sufficiently lower than the expected fair value of the property at the date, the option becomes exercisable).
  3. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25 percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.
  4. At the inception of the lease, the present value of the minimum lease payments, excluding executory costs, to be paid by the lessor, including any profit, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by the lessor and expected to be realized by him. However, if the beginning of the lease falls within the last 25 percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

The asset is capitalized at the present value of the minimum lease payments.

COMPONENT PART

Any physical piece of equipment

CONSTRUCTED AND FABRICATED EQUIPMENT

Constructed equipment shall be capitalized if the cost of material and labor incurred by the UW institution is $5,000 or more and its useful life is at least two years. Labor costs should be included only when these costs are documented by an external source or in-house shop. Documentation normally would include internal or external requisitions.

DONATED CAPITAL

Donated equipment shall be capitalized if the current value determined by donor on the date of gift is $5,000 or more and its useful life is at least two years (Gift-in-Kind form from UW-Platteville Foundation is required).

HOME DEPARTMENT

The home department is any department on the campus that purchases a piece of equipment for use in that department. The term is used to distinguish those departments from Central Receiving located in Central Stores and Maintenance and the Purchasing located on the Second Floor of Ullsvik Hall.

INVENTORY CONTROL

The office responsible for the maintenance of the official capital equipment inventory for UW-Platteville. The office is located at 2404 Ullsvik Hall. You may contact Inventory Control at 608.342.6171 or by e-mail to: inventory@uwplatt.edu

Item

A valid capital inventory entity that may or may not have component parts

LIBRARY ACQUISITIONS

Library acquisitions are to be considered capital items subject to the guidelines of FPPP #47. They are not considered capital equipment and are out of the scope of this manual. See FPPP #47 for details.

OIT

Office of Information Technology

Replacement Parts

Subsequent replacements or enhancements made to the unit shall be capitalized if they have an acquisition cost of $5,000 or more and a useful life of two or more years. Replacement parts that are acquired as part of normal repair and maintenance are not capitalized.

System

The following are definitions of systems and components:

  1. System
    1. Two or more individual items of equipment that are connected. Systems are added to the capital equipment inventory file if both of the following conditions are met:
      1. The total cost of the component parts is $5,000 or more.
      2. Component parts with an individual value of less than $5,000 cannot be operated independent of the system.
  2. Major Component
    1. An equipment item that costs $5,000 or more, free standing and connected to another piece of equipment.
  3. Minor Component
    1. An equipment item that costs $5,000 or more, which cannot be used by itself without a major retrofit.
    2. A minor component is attached to a major component.
      1. The minor component purchased at the same time as its major component is added to the value of the major component as a system. See A above.
      2. A minor component purchased subsequent to the purchase of a major component is inventoried separately. Cross-references to the related inventory numbers are entered in both the major and minor component inventory records.
  4. Supply Component
    1. A freestanding or non-freestanding piece of equipment, that costs under $5,000.
    2. A supply item by itself is not capital equipment, and therefore, is not inventoried.
    3. A supply item and its cost may become a permanent part of a major component or an assembly under the following circumstances:
      1. The supply item is purchased at the same time as the major component. (Not necessarily on the same P.O.)
      2. The supply item is purchased from residual capital funds from the grant that funded the original purchase.

For purposes of inventory, the component part that either has the highest value or is the most visible will act as the inventory item. This component part will carry the inventory tag and all of the value of the system. All inventory information (serial numbers, model numbers and so forth) will be information for the component part that either has the highest value or is the most visible. The inventory description of the item will end in the word "SYS" to signify the system status of the item.

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