Business Procedures Manual

Fiscal Affairs Division

7.7 Equipment

7.7.1 Equipment Definition

(Last Modified on May 1, 2017)

Equipment includes machinery, furniture, vehicles and other personal property that is either a fixed or a movable tangible asset to be used for operations, the benefits of which extend beyond one year from date of acquisition and rendered into service. Improvements or additions to existing equipment that meet the capitalization threshold and increase the value or life of the asset by 25 percent of the original cost or life should be capitalized and recorded as an addition to the value of the existing asset using a parent/child asset management relationship. The useful life of the parent may be modified to reflect an increase in useful life.

Generally, the useful life of the addition or improvement (the 鈥渃hild鈥) should not exceed that of the original asset (the 鈥減arent鈥). However, if the improvement is not an integral part of the original asset, it may possess a different useful life than the parent asset. For example, new memory in an existing file server could possess a different useful life than its parent because if necessary, this memory could be moved to another file server. See Section 7.1.15 for discussion on component depreciation.

For schedule of useful lives of capitalized assets, see Appendix, Section 7.15.3.

Note: Costs of extended warranties and/or maintenance agreements that can be separately identified from the cost of the equipment should not be capitalized.

7.7.2 Depreciation Methodology

(Last Modified on May 1, 2017)

The straight-line depreciation method (historical cost, divided by useful life) will be used for equipment.

7.7.3 Capitalization Threshold

(Last Modified on May 1, 2017)

The capitalization threshold for equipment is $5,000.

Examples of expenditures to be capitalized as equipment include:

  • Original contract or invoice price
  • Freight charges
  • Import duties
  • Handling and storage charges
  • In-transit insurance charges
  • Applicable sales, use, and other taxes imposed on the acquisition
  • Installation charges
  • Charges for testing and preparation for use
  • Costs of reconditioning used items when purchased
  • Parts and labor associated with the construction of equipment

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