Standard Operating Procedures

SUBJECT: Capitalization of Found Equipment
SOURCE: Capital Asset Management, Office of the Treasurer
ORIGINAL DATE OF ISSUE: 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. During a physical inventory an organization may find capital assets that are not presented on the inventory report
  2. When an asset was retired in error
  1. During a physical inventory an organization may find capital assets that are not presented on the inventory report

    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.

    • For equipment purchased 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 reference the Using Movable Capital Equipment Object Codes financial document.

    • Prior year - Assets that were expensed incorrectly in a prior fiscal year will not be corrected. Prior year "found" assets will only be re-created 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.

  2. When an asset was 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 on the add an asset document:
Account Number Object Code Description DR CR
12-700-00 7701 Found Capital Equipment 6,500  

Transaction Generated by the add an asset document:
Account Number Object Code Description DR CR
12-700-00 4997 Capital Asset Adjustment   6,500

Capitalization Process:
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 Assets must have an acquisition value of at least $5,000 and a useful life expectancy of one year or greater.

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

Found capital assets are those assets that were retired in error, or incorrectly coded as non-capital in a prior fiscal year.
CROSS REFERENCE: CSOP 4.0 Physical Inventories
CSOP 7.0 IU Gifts

CSOP 8.0 Capitalization of Moveable Equipment
CSOP 40.0 Transfer-in Capital Assets
Accounting Administration Policy FIN-ACC-I-150 Capitalization of Moveable Equipment
Using Movable Capital Equipment Object Codes in Financial Documents
RESPONSIBLE ORGANIZATION: Office of the Treasurer, Capital Asset Management