Standard Operating Procedures

SUBJECT: Transfer-in Capital Assets
SOURCE: Capital Asset Management, Office of the Treasurer
ORIGINAL DATE OF ISSUE: June 2010
CSOP NO: 40.0
RATIONALE: To provide guidelines for the capitalization of assets transferred in from other universities or government surplus
CSOP: Whether an organization receives equipment through a transfer from another institution or from government surplus, the equipment list should be sent to the University Capital Asset Office at capasset@iu.edu.

The University Capital Asset Office will initiate the add asset documents to create the assets that meet the capitalization criteria.

Most of the information needed to create the assets will be supplied by the transferring institution on the equipment list.

The equipment list should have the following information:
  • quantity
  • vendor
  • manufacturer
  • asset description
  • serial number
  • original acquisition date
  • original cost
The University Capital Asset Office will need the following additional information from the receiving organization in order to create the assets:
  • transferring institution
  • account number, this should be an active operating account
  • fair market value (optional)
  • date the equipment was received by IU
  • campus, building and room
Generally, the acquisition value of a transfer-in should be based on the fair market value of the asset. However, due to the difficulty of determining the fair market value of assets, the University Capital Asset Office will use the book value instead. The book value is calculated using the original acquisition date, original cost and the useful life assigned to the asset and is the difference between the original cost and the accumulated depreciation.

If the organization chooses, they can supply the University Capital Asset Office with the fair market value of the asset(s). The organization will be required to supply supporting documentation if the fair market value is given. The fair market value can be determined by references to the realizable value of similar assets that are sold for cash, quoted market prices, or independent appraisals.1
  1. Transfer-in of university owned assets
    A transfer-in of a university owned asset(s) will be assigned an acquisition type of T for transfer-in. The expense object code for this type of transfer-in will be set to 7700 for gift.

  2. Transfer-in of federally funded assets
    If the transfer-in asset(s) are federally funded we will assign the acquisition type as T for transfer-in. The expense object code of 7730 will be used.

    For assets purchased on a grant that will be transferred to IU, a secondary account (other than a grant account) created by Contract and Grant Administration will need to be supplied for the creation of the transferred-in assets.

    The University Capital Asset Office will need the following additional information from the receiving organization.

    • Grant account number
    • Name of the Professor
    • University name the equipment is transferring from
    • Grant Number

  3. Transfer-in of federal or other owned assets
    If the transfer-in assets are federal or other owed the acquisition type will be set to "S" Capital Transfer-in Federal/Other Owned. The expense object code will be set to 7731.
Capitalization entries for Transfer-in Equipment:
On the add asset document for Transfer-in equipment, the University Capital Asset Office will enter the Account Number, Object Code and Net Book Value or the Fair Market Value of the equipment based on information supplied from the receiving 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 7700 and to income object code 1175 for the value of the item. 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 7700 Gift Cap Equipment 6,500  

Transaction Generated by the add an asset document:
Account Number Object Code Description DR CR
12-700-00 1175 Gift Cap Equipment   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 in this example on the add asset document were Account 1270000, Object Code 7700 and a Fair Market Value of $6,500.00. The remaining entries were generated by the Add an 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.

Transfer-in capital assets are those received from an external organization (usually another university) or government surplus.

Equipment List - The equipment list is a listing of the equipment received from the transferring institution.

Receiving Organization - The Indiana University organization that received the equipment.

Fair Market Value - The Fair Market Value (FMV) is the price that a willing buyer would pay to a willing seller, in a free market, for an asset or any piece of property.2

Net realizable value - The realizable value (NRV) is a method of evaluating an asset's worth when held in inventory, in the field of accounting. NRV is part of the Generally Accepted Accounting Principles and International Financial Reporting Standards (IFRS) that apply to valuing inventory, so as to not overstate or understate the value of inventory goods. Net realizable value is generally equal to the selling price of the inventory goods less the selling costs (completion and disposal).2

Federally owned equipment - Federally owned equipment is defined as assets that utilize a contract and grant account for the purchase, indicating the federal government or agency will retain ownership upon the completion of the grant or contract.
CROSS REFERENCE: CSOP 4.0 Physical Inventories
CSOP 8.0 Capitalization of Moveable Equipment
Accounting Administration Policy FIN-ACC-I-150 Capitalization of Moveable Equipment
RESPONSIBLE ORGANIZATION: Financial Management Services, Office of the Treasurer

1APB-29, par.25, Accounting for Nonmonetary Transactions
2Reference from Wikipedia