Standard Operating Procedures

SUBJECT: Capital Assets Not Expected To Be Received in Current FY
SOURCE: Capital Asset Management, Office of the Treasurer
ORIGINAL DATE OF ISSUE: November 10, 2006
DATE OF LAST REVISION: April 2008
CSOP NO: 38.0
RATIONALE: To provide direction to university departments for the procurement of capital assets not expected to be received in the current fiscal year.
CSOP:
  1. Identifying procurement orders not expected to be received in the current fiscal year
  2. Notifying CAMS that a procurement order is not expected to be received in the current fiscal year
  3. Reporting and accounting for capital assets not expected to be received in the current fiscal year
  1. Identifying procurement orders not expected to be received in the current fiscal year

    Capital assets at Indiana University are held as construction in progress and do not begin depreciating until they are placed into service as fully operational assets. The University Capital Asset Office has identified four conditions in which capital assets are held as construction in progress.

    1. The equipment will not be received within the current fiscal year, even if the payment is made prior to fiscal year end.

      Capital assets may be purchased and invoiced in the current fiscal year but shipment does not take place until the next fiscal year. The best practice for identifying procurement orders not expected to be received in the current fiscal year is to determine the delivery date. The vendor should be able to provide an anticipated delivery date. If the vendor indicates your procurement order will not be received at IU until after June 30th of the current fiscal year your procurement order is not expected to be received in the current fiscal year and will be capitalized as construction in progress.

    2. Partial payments (down payments) will be issued for the equipment and the equipment is not expected to be received in the current fiscal year.

      Capital assets may be purchased and invoiced with a partial payment more commonly known as a down payment. The partial payment can be made at the time the purchase order is approved and before the capital asset is shipped. Partial payments can also be made over specified intervals before the capital asset is shipped. If a partial payment is made before the asset can be received the partial payment will cause the asset to be created as construction in progress until the asset is received and is fully operational.

    3. Equipment has been received, but will not be placed into service.

      Equipment that has been received, but will not be placed into service as a fully operational asset should be capitalized as construction in progress. Examples could include:

      • A piece of equipment is delivered to IU but can not be installed in its current location due to the need for building modifications to allow for the appropriate use of the equipment.
      • A piece of equipment is delivered to IU and purchased under a warranty agreement in which the vendor must physically un-box and install the equipment at IU before the warranty is valid.

    4. Assembling an asset.

      Organizations should use the EPIC CAMS Document to notify the University Capital Asset Office that their procurement order for a capital purchase will not be received in the current fiscal year as identified from the conditions above. The EPIC CAMS Document is generated from the purchase order approval and routes to the initiator of the requisition. The "Not expected to be received in current FY" should be checked on the CAMS Document if your purchased asset qualifies for any of the above conditions.

      If for any reason your capital asset remains idle and not placed into service as a fully operational asset upon receipt at IU the asset should be created as construction in progress.

  2. Notifying CAMS that a procurement order is not expected to be received in the current fiscal year.

    Organizations should use the EPIC CAMS Document to notify the University Capital Asset Office that their procurement order for a capital purchase will not be received in the current fiscal year as identified from the conditions above. The EPIC CAMS Document is generated from the purchase order approval and routes to the initiator of the requisition. The "Not expected to be received in current FY" should be checked on the CAMS Document if your purchased asset qualifies for any of the above conditions.

    Checking this flag and clicking on the "update view" button will assign asset type code 40004. Asset type code 40004 identifies the capital asset as "in progress" until the asset has been received and is fully operational. The University Capital Asset Office uses the 40004 asset type code to generate a report to identify those assets which have not been received. When the capital asset is received and tagged the University Capital Asset Office will change the create date and assign the appropriate asset type code for that type of equipment at which time the asset will begin depreciating. The asset create date assigned will be the date that the asset was tagged.

    See CAMS Training Materials for more information.

  3. Reporting and accounting for capital assets not expected to be received in the current fiscal year.

    In accordance with Generally Accepted Accounting Principles, is required that assets are not depreciated until they have been received and are fully operational. If an organization determines that a capital asset will not be received or will not be fully operational in the current fiscal year, the organization should indicate the reason and the actual or approximate date the asset will be delivered and/or is fully operational on the Org Text line of the asset on the Capital Asset Maintenance screen. The organization should also notify the CAMS Asset Inventory Coordinator that the asset will not be received or will not be fully operational in the current fiscal year.

    If an asset has incurred depreciation, but has not been received or is not fully operational, the University Capital Asset Office will retire the original asset and reverse out any related depreciation charges. A new asset will be established with the asset type code 40004.

    If depreciation has not been incurred on the asset the University Capital Asset Office will change the asset type code to 40004. When the asset has been tagged the asset type code will be changed back to a depreciable status.
DEFINITIONS: Capital Assets must have an acquisition value of at least $5,000 and a useful life expectancy of one year or greater.

Depreciation - The periodic charge to income that results from a systematic and rational allocation of cost over the life of a tangible asset.
CROSS REFERENCE: CSOP 8.0 Capitalization of Movable Equipment
RESPONSIBLE ORGANIZATION: Organizations that purchase and maintain capital equipment