Standard Operating Procedures

SUBJECT: Capitalization of Asbestos Abatement Cost
SOURCE: Capital Asset Management, Office of the Treasurer
ORIGINAL DATE OF ISSUE: December 2012
DATE OF
LAST REVISION:
N/A
CSOP NO: 43.0
CSOP:

Asbestos abatement costs can be capitalized if the costs exceed $75,000 and any one of the following criteria is met:

  1. The costs extend the life, increase the capacity, or improve the safety or efficiency of the property. The condition of the property must be improved as compared with the condition when originally constructed or acquired.
  2. The costs mitigate or prevent contamination that has yet to occur.

Example: A project is undertaken to renovate a building on campus.  It is determined that asbestos is present and that it will need to be removed.  The removal of the asbestos will improve the safety of the building and mitigates or prevents future contamination.  The asbestos costs may or may not be capitalized depending on the total cost of the project.

Example in which asbestos costs should be capitalized:

Renovation costs
$130,000
Asbestos removal related to renovation
$20,000
Total Costs
$150,000

Since the total costs of the overall project does meet the $75,000 threshold, all costs should be capitalized to an object code such as 7303-Building Improvements.

Situation in which asbestos costs should not be capitalized:

Renovation costs
$40,000
Asbestos removal related to renovation
$10,000
Total Costs
$50,000

Since the total costs of the overall project do not meet the $75,000 threshold, all costs should be expensed to an object code such as 4700-Repairs and Maintenance.

DEFINITIONS: Asbestos Abatement - The safe removal of asbestos deemed to be dangerous to inhabitants of a building.
CROSS REFERENCE: Emerging Issues Task Force (EITF) 90-8 and 89-13
RESPONSIBLE ORGANIZATION: Capital Asset Management, Office of the Treasurer