Standard Operating Procedures

SUBJECT: Capitalization of a Cluster
SOURCE: Capital Asset Management, Office of the Treasurer
ORIGINAL DATE OF ISSUE: December 2010
CSOP NO: 42.0
RATIONALE: To provide guidance on the capitalization of a cluster. A cluster asset can often be paid for over several fiscal years; however clusters are normally placed in-service upon delivery. If a cluster asset is not set up correctly, it can cause catch-up depreciation for a prior year. Depreciation is an important part of the calculation used to set the indirect cost rate for the university. For this reason is it important that current year additions are not applied to a prior year asset; which would cause an adjustment to prior year depreciation.
CSOP: Research clusters, or networking clusters that work together to provide data processing capabilities are capitalized as system assets. Classroom clusters such as a training room, are not capitalized as system assets.

System assets are defined as components that work together to perform one function. Each component is necessary for the system to function as a whole. Removal of any one component would result in the system not operating at the required capacity or for its intended purpose.

Cluster assets are categorized as moveable system assets regardless of how the asset is created; therefore a moveable equipment object code should be assigned. In some cases a fabrication request document will be used to create the asset; however this does not change the object code that should be used on the procurement transaction.

Because multiple assets can be created for a cluster we highly recommend that a project number be set up for each cluster. Project numbers are part of the accounting record and will allow you to run reports for a given cluster. Once the project number is set up it must then be entered in the accounting line on the requisition.

For instructions on setting up a project reference Chart of Accounts Maintenance Group Definitions and Document Rules: https://fms.iu.edu/index.php/download_file/view/322/

Following is a listing of moveable computer equipment object codes to be used on the cluster purchase requisitions:

table a
Object Code Description
7015 Computer Equipment
7035 Computer Equipment - Federally Funded
7036 Computer Equipment - Federally Owned
  • A federally funded object code should be used when a contract and grant account is coded with a federal sub-fund (FEDER).
  • A federally owned object code should also be used when the granting agency holds title to the asset.
Procedures for Cluster Asset Set Up:

Cluster setup processes depend on when the cluster will be put into use. The four categories and their PO and Asset documentation procedures are listed below:
  1. Capitalization of a cluster purchased and paid for in IU's current fiscal year, and placed in-service right away
  2. Capitalization of a cluster purchased and paid for in the IU's current fiscal year, and will not be in-service until configuration is complete
  3. Capitalization of a cluster purchased and paid for over several IU fiscal years and placed in-service right away
  4. Capitalization of a cluster purchased and paid for over several IU fiscal years and will not be in-service until configuration is complete
  1. Capitalization of a cluster purchased and paid for in IU's current fiscal year, and placed in-service right away

    On the purchase requisition the user will enter a CAMS Transaction Type of "New". As well as the appropriate object code see table a.

    Once the asset has been created by the first payment request any new requisitions within that fiscal year should have the CAMS Transaction Type set to" Modify Existing". This will require the asset number created from the initial requisition/purchase order/payment request.

    On the EPIC CAMS Document the asset type code should be assigned from the following list:

    table b
    Type Code Description Useful Life
    206 Computer, Super Computer, or Sever 5
    10260 Computer, Enterprise Server 3

    For more information on completing the EPIC CAMS Document please reference the EPIC CAMS training document located on the CAMS training materials page.

    The asset should be tagged and is considered complete.

  2. Capitalization of a cluster purchased and paid for in the IU's current fiscal year, and will not be in-service until the configuration is complete

    On the purchase requisition the user will enter a CAMS Transaction Type of "New." As well as the appropriate object code see table a.

    On the EPIC CAMS Document the asset type code should be assigned as 40004 (Moveable asset not yet received, or placed in service). This is accomplished by checking the box "Not expected to be received in current FY.On the EPIC CAMS Document the asset type code should be assigned as 40004 (Moveable asset not yet received, or placed in service). This is accomplished by checking the box "Not expected to be received in current FY.

    Once the asset has been created by the first payment request any new requisitions within that fiscal year should have the CAMS Transaction Type set to "Modify Existing". This will require the asset number created from the initial requisition/purchase order/payment request.

    When the configuration is complete, the asset should be tagged
    . The tagging of the asset will alert Capital Asset Management that the asset is now complete and ready to be placed in service. When tagging the asset the type of "40004" should not be changed by the organization.

  3. Capitalization of a cluster purchased and paid for over several IU fiscal years and placed in-service right away

    For clusters that are expected to be expanded yearly, we will create the cluster asset using a layered approach (creating a new asset for cluster purchases each IU fiscal year) This methodology will ensure additions that cross IU fiscal years do not generate catch-up depreciation.

    This will be done by setting up a fabrication in the KFS system before the first cluster purchase of the current fiscal year.

    Reminder: Cluster assets are categorized as moveable system assets regardless of how the asset is created; therefore a moveable equipment object code (reference table a) should be assigned on the purchase requisition instead of the standard fabrication code codes.

    Purchases within subsequent IU fiscal years will require a new fabrication set up. Each fiscal year the organization will issue a fabrication document to create a new asset.

    The Fabrication document requires:
    1. account
    2. campus
    3. building code
    4. description
    5. room number
    6. asset type:
      • For the initial asset the asset type code should be assigned as 40004 (Moveable asset not yet received, or placed in service.) This identifies the asset as in progress, and not eligible for depreciation.
      • For subsequent fabrication setups assets will be assigned the 206 Computer, Server or Super Computer, or 10260 Computer, Enterprise Server.
    7. estimated completion date
    8. estimated life
    9. estimated cost
    10. and must meet with the fiscal officer's approval

    When the cost of the initial asset reaches the capitalization threshold the asset will be moved from in progress to complete.

    On the purchase requisition the user will enter a CAMS Transaction Type of "Modify Existing". The "Modify Existing" transaction type will require an asset number; enter the asset number generated by the fabrication document.

    For asset documentation. The initial asset cluster asset will be tagged; any subsequent assets will be assigned a capital letter "N" in the tagging field. The organization will need tie or cross reference the assets together using the organization text field. Example: This asset is part of the cluster asset with tag number IU123456.

  4. Capitalization of a cluster purchased and paid for over several IU fiscal years and will not be in-service until configuration is complete

    On the initial requisition enter a CAMS Transaction Type of "New".

    On the EPIC CAMS Document the asset type code should be assigned as 40004 (Moveable asset not yet received, or placed in service.) This is accomplished by checking the box "Not expected to be received in current FY.

    Once the in progress asset has been created by the first payment request any new requisitions should have the CAMS Transaction Type set to" Modify Existing". This will require the asset number created from the initial requisition/purchase order/payment request.

    When the configuration is complete the asset should be tagged. The tagging of the asset will alert Capital Asset Management that the asset is now complete and ready to be placed in service. When tagging the asset the type of "40004" should not be changed.
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.

Systems are defined as components that work together to perform one function. These components must be necessary for the system to function as a whole. Removal of any one component would result in the system not operation at the require capacity or for the intended purpose.

CROSS REFERENCE: CSOP 8.0 Capitalization of Moveable Equipment
RESPONSIBLE ORGANIZATION: Organizations that purchase and maintain capital equipment