Fixed Assets Building Component Depreciation Policy Section: Fixed Assets Administration
Number: 55.110
Title: Fixed Assets Building Component Depreciation Policy
Index POLICY
.100 POLICY STATEMENT .110 POLICY RATIONALE .120 AUTHORITY .130 APPROVAL AND EFFECTIVE DATE OF POLICY .140 KNOWLEDGE OF THIS POLICY .150 DEFINITIONS .160 RESPONSIBILITIES .170 POLICY PROVISIONS .180 BUILDING COMPONENTS .190 ALLOCATING CAPITALIZED COSTS TO BUILDING COMPONENTS .690 CONTACT INFORMATION .695 HISTORY
APPENDIX
.710 BUILDING COMPONENT ASSET TYPE AND USER DEFINED CODES .995 HISTORY
Direct questions about this policy to the following offices: Contact
Subject General questions from institutional personnel
Institution Office of Business Affairs
General questions from institutional central administration and Chancellor's Office personnel
Chancellor's Office Controller's Division
.695 HISTORY
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07/02/04 Approved 12/12/05 Revised 01/19/06 Revised Policy Last Updated: 01/19/06
APPENDIX
.710 BUILDING COMPONENT ASSET TYPE AND USER DEFINED CODES Building component records in the Banner Fixed Asset system are identified and categorized by a series of asset type and user defined codes. Use the following table as a reference for selecting the asset type and user defined code when adding a new building component record to Banner Fixed Assets. Asset Type Codes
Componentized Buildings
Major Improvements to Componentize d Buildings
Gen Ed , Ad mi n, In str & Re se ar ch
Library M us eu ms
Gen Ed , Ad mi n, In str & Re se ar ch
Library M us eu ms
BUILDING COMP ONEN T
ESTIMA TED USE FUL LIFE (in year s)
User D e fi n e d C o d e
Building Shell
Site
50
SP
HG
HL
JG
JL
GENERAL COMP ONENT S OF A BUILDI NG
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Prepa ration
Foundatio n
50
FD
HG
HL
JG
JL
Steel Frame
50
SF
HG
HL
JG
JL
Constructi on Exteri or
50
CE
HG
HL
JG
JL
Floor Struct ure
50
FS
HG
HL
JG
JL
Walls‐ Exteri or
50
WE
HG
HL
JG
JL
Roof Struct ure
50
RS
HG
HL
JG
JL
Building Finishe s
Roof Cover
20
RC
OG
OL
PG
PL
Constructi on Interi or
20
CI
OG
OL
PG
PL
Floor Cover
20
FL
OG
OL
PG
PL
Building Service s System s
Electric
23
EL
KG
KL
MG
ML
Heating,
23
HV
KG
KL
MG
ML
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Ventil ation & AC
Plumbing
23
PG
KG
KL
MG
ML
Fire Protec tion
23
FP
KG
KL
MG
ML
Elevators
23
EV
KG
KL
MG
ML
Fixed Equip ment
Fixed Equip ment 20 yr
20
FA
OG
OL
PG
PL
Fixed Equip ment 15 yr
15
FB
QG
QL
RG
RL
Fixed Equip ment 10 yr
10
FC
SG
SL
TG
TL
IT & Netw ork Infrast ructur e
10
FI
SG
SL
TG
TL
.995 HISTORY 08/01/06 Approved Appendix Last Updated: 08/01/06
POLICY
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.100 POLICY STATEMENT The following policy provides for the consistent application of building component depreciation and serves as a reference for answering questions relating to building component depreciation. .110 POLICY RATIONALE 1. CRITERIA
Criteria used in developing building component depreciation include:
GASB Statements, especially GASB No. 34 Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments OMB Circular A‐21 Cost Principles for Educational Institutions 2. OBJECTIVES OF BUILDING COMPONENT DEPRECIATION
The purpose of building component depreciation is to more accurately measure the annual depreciation of multi-functional academic buildings with significant investments in fixed equipment and infrastructure. Buildings are made up of components with each component having its own useful life. Depreciation is more accurately measured when based on the useful life of each component. .120 AUTHORITY o o o o o o o o
ORS 351.085 ‐ Duties and Powers of Chancellor ORS 351.090 ‐ Standardization of accounts and Records; Preparation of Budget; Allocation of Funds ORS 351.210 ‐ Disposition of Unnecessary Equipment ORS 351.315 ‐ Borrowing Money for Purchase of Real Property ORS 351.340 ‐ Use of Moneys OAR 580‐040‐0005 ‐ Delegation and Assignment of Responsibility OAR 580‐050‐0015 ‐ Purchases of Real Property IMD 6.001 ‐ Finance and Business Affairs Accounting Policies ‐ Assignment of Responsibility
.130 APPROVAL AND EFFECTIVE DATE OF POLICY This policy was approved by the Controller on July 2, 2004, before the completion of the FY 2004 Closing of the Books, with an effective date of July 1, 2003. Significant changes to the building component depreciation methodology, the building component descriptions, and the building component service lives took place with an effective date of July 1, 2004 for OSU, and July 1, 2005 for PSU and UO.
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.140 KNOWLEDGE OF THIS POLICY All institutional and Chancellor's Office personnel with fixed asset-related responsibilities should be knowledgeable of this policy. .150 DEFINITIONS Building component depreciation refers to allocating the capitalized cost of buildings into a series of components and depreciating each component over the estimated service life of that component. As used in this definition, the word "component" differs from the Banner Fixed Assets terminology of "components" and "attachments." .160 RESPONSIBILITIES University and OUS Controller's Division responsibilities for building component depreciation include the following:
11. UNIVERSITY RESPONSIBILITIES: Identifying buildings subject to building component depreciation. Determining the cost of each component through analysis of construction records for the componentized building. Recording and calculating building component depreciation in Banner Fixed Assets and Banner FIS. Reconciling Banner Fixed Assets to Banner FIS. Maintaining supporting documentation for all transactions in Banner Fixed Assets and Banner FIS. 12. CONTROLLER'S DIVISION RESPONSIBILITIES: Developing accounting policies pertaining to building component depreciation. Maintaining and updating Banner Fixed Assets validation tables.
.170 POLICY PROVISIONS OUS institutions with significant organized research programs may componentize some or all academic buildings on their campus to more accurately measure the annual depreciation. Componentized depreciation is based on the useful life of each component. Building component depreciation may only be applied prospectively based on componentizing new buildings and/or applying componentization on the undepreciated portion of existing buildings.
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Building component depreciation is limited to buildings. Building component depreciation does not apply to non-building real property such as improvements other than buildings, infrastructure, land, and land improvements, or to personal property. 13. All OUS institutions will utilize the same components and useful lives for buildings based on Asset Type, as defined by Banner Fixed Assets. 14. Each OUS institution doing component depreciation shall determine which buildings on their respective campus will be componentized. 1. When a building is componentized, all previous and subsequent capitalizations will be componentized. 2. Additions to a componentized building will also be componentized. 3. Capitalized improvements or remodels to a componentized building will also be componentized. 4. Maintenance, repair and upkeep of each component that neither adds to the permanent value nor appreciably prolongs its intended life will be expensed and not capitalized (reference OMB Circular A‐21 J.26). For additional information on capitalization policy, refer to section 55.100.180 CAPITALIZATION POLICY of the OUS Fiscal Policy Manual.
.180 BUILDING COMPONENTS OUS has 19 building components that are grouped into four general components of a building. The four general components and the 19 building components (and their estimated useful life) to be used by all universities for building component depreciation include the following:
GENERAL COMPONENTS OF A BUILDING
ESTIMATED USEFUL LIFE (in years)
BUILDING COMPONENT
Building Shell
Site Preparation
50
Foundation
50
Steel Frame
50
Construction Exterior
50
Floor Structure
50
Walls‐Exterior
50
Roof Structure
50
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Building Finishes
Roof Cover
20
Construction Interior
20
Floor Cover
20
Building Services Systems
Electric
23
Heating, Ventilation & AC
23
Plumbing
23
Fire Protection
23
Elevators
23
Fixed Equipment
Fixed Equipment 20 yr
20
Fixed Equipment 15 yr
15
Fixed Equipment 10 yr
10
IT & Network Infrastructure
10
.190 ALLOCATING CAPITALIZED COSTS TO BUILDING COMPONENTS For buildings to be componentized, Universities are not required and not expected to split the payment of each invoice into individual building components. Instead, the building's total capitalized cost is to be allocated to the individual building components when the building is recorded in Banner Fixed Assets as a "substantially completed building." "Substantially complete" means receipt of an unconditional certificate of occupancy from the appropriate state and/or local building officials and the majority (i.e. 98%) of the expenditures related to the project have been paid. At the time of recording the asset as a "substantially completed building," Universities will determine if the building is to be componentized. If the building is to be componentized, the actual costs from the schedule of values for that building construction will be used to determine the amount for each of the building components shown above. Addition or capitalized improvement costs will be determined from contractor invoices or the schedule of values. .690 CONTACT INFORMATION
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