CSOP 33.0 Capitalization of Found Equipment

SUBJECT:

Capitalization of Found Equipment

SOURCE:

Capital Asset Management

ORIGINAL DATE

OF ISSUE:

July 2010

DATE OF

LAST REVISION:

July 2010

CSOP NO:

33.0

RATIONALE:

To provide guidelines for reporting found capital assets.

CSOP:

There are two situations where an asset may need to be capitalized as found equipment 1) where the "found" asset is not presented on the asset list for the organization or 2) when the asset was retired in error.


Found Asset not on Asset List

Asset Retired in Error

Capitalization entries for Found Equipment

 

Found Asset not on Asset List
Research needs to be done on the "found" asset to determine how the asset was acquired. 

 

If the "found" asset was acquired by a gift from an external institution please refer to CSOP 7.0 IU Gifts.

If the "found" asset was acquired as a transfer-in from another institution, please refer to CSOP 40.0 Transfer-in Capital Assets.

 

If the "found" asset was acquired from a purchase:

  • in the current fiscal year- a general error correction document(GEC) should be issued by the organization to correct the object code. The GEC will result in the creation of the capital asset.

    For information on how to issue a general error correction please see the video tutorial GEC from Expense to Capital Object Code.

  • in the prior fiscal year - Assets that were expensed incorrectly in a prior fiscal year will typically not be corrected. Prior year "found" assets will only be recreated by the University Capital Asset Office when the cost of the asset is material to the university. Prior year "found" assets should be reported to the University Capital Asset Office at capasset@iu.edu. The University Capital Asset Office will research the asset to determine if a found asset should be created.

Asset Retired in Error
If the asset was depreciating and retired in error, the asset will only be re-created when the net book value is equal to or greater than the capitalization threshold of five thousand dollars.

Assets retired in error should be reported to the University Capital Asset Office at capasset@iu.edu.

 

Capitalization entries for Found Equipment
On the add asset document for "found" equipment, the University Capital Asset Office will enter the Account Number, Object Code and Net Book Value or Fair Market Value of the equipment based on the original procurement information, or information supplied by the organization.

The accounting entries are then created based on the financial information entered into the payment section of the add asset document. The account will see offsetting entries to the expense object code 7701 and to expense object code 4997 capital asset adjustment. The entries offset, having no effect on Cash or Fund Balance.

Transaction entered Add Asset document:

Account Number Object Code Description DR CR
12-700-00 7701 Found Capital Equipment 6,500  


Transaction Generated by Add Asset document:

Account Number Object Code Description DR CR
12-700-00 4997 Capital Asset Adjustment   6,500


Capitalization Entries:

Account Number Object Code Description DR CR
95-700-74 8610 Capital Equipment 6,500  
95-700-74 9899 Fund Balance   6,500


The only information supplied on the add asset document in this example was Account 1270000, Object Code 7701 and a Net Book Value of $6,500.00. The remaining entries were generated by the add asset document and the Capitalization Process.

DEFINITIONS:

Capital Equipment- must have an acquisition value of at least $5,000 and a useful life expectancy of one year or more.

Equipment- The term “equipment” includes delivery equipment, office equipment, machinery, furniture and fixtures, factory equipment and similar fixed assets.

Found capital assets- assets that were retired in error, or incorrectly coded as non-capital in a prior fiscal year.

CROSS

REFERENCES:

CSOP 4.0 Physical Inventories
CSOP 7.0 IU Gifts

CSOP 8.0 Capitalization of Moveable Equipment
CSOP 40.0 Transfer-in Capital Assets
Policy FIN-ACC-I-150 Capitalization of Moveable Equipment

RESPONSIBLE

ORGANIZATION:

Capital Asset Management