Fixed Assets Building Component Depreciation
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
Direct questions about this policy to the following offices:
Subject | Contact |
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 |
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.
GENERAL COMPONENTS OF A BUILDING | BUILDING COMPONENT | ESTIMATED USEFUL LIFE (in years) | User Defined Code | Asset Type Codes | |||
---|---|---|---|---|---|---|---|
Componentized Buildings
|
Major Improvements to Componentized Buildings
|
||||||
Gen Ed, Admin, Instr & Research
|
Library Museums
|
Gen Ed, Admin, Instr & Research
|
Library Museums
|
||||
Building Shell | |||||||
Site Preparation |
50
|
SP
|
HG
|
HL
|
JG
|
JL
|
|
Foundation |
50
|
FD
|
HG
|
HL
|
JG
|
JL
|
|
Steel Frame |
50
|
SF
|
HG
|
HL
|
JG
|
JL
|
|
Construction Exterior |
50
|
CE
|
HG
|
HL
|
JG
|
JL
|
|
Floor Structure |
50
|
FS
|
HG
|
HL
|
JG
|
JL
|
|
Walls-Exterior |
50
|
WE
|
HG
|
HL
|
JG
|
JL
|
|
Roof Structure |
50
|
RS
|
HG
|
HL
|
JG
|
JL
|
|
Building Finishes | |||||||
Roof Cover |
20
|
RC
|
OG
|
OL
|
PG
|
PL
|
|
Construction Interior |
20
|
CI
|
OG
|
OL
|
PG
|
PL
|
|
Floor Cover |
20
|
FL
|
OG
|
OL
|
PG
|
PL
|
|
Building Services Systems | |||||||
Electric |
23
|
EL
|
KG
|
KL
|
MG
|
ML
|
|
Heating, Ventilation & AC |
23
|
HV
|
KG
|
KL
|
MG
|
ML
|
|
Plumbing |
23
|
PG
|
KG
|
KL
|
MG
|
ML
|
|
Fire Protection |
23
|
FP
|
KG
|
KL
|
MG
|
ML
|
|
Elevators |
23
|
EV
|
KG
|
KL
|
MG
|
ML
|
|
Fixed Equipment | |||||||
Fixed Equipment 20 yr |
20
|
FA
|
OG
|
OL
|
PG
|
PL
|
|
Fixed Equipment 15 yr |
15
|
FB
|
QG
|
QL
|
RG
|
RL
|
|
Fixed Equipment 10 yr |
10
|
FC
|
SG
|
SL
|
TG
|
TL
|
|
IT & Network Infrastructure |
10
|
FI
|
SG
|
SL
|
TG
|
TL
|
08/01/06 Approved
Appendix Last Updated: 08/01/06
-
-
POLICY
-
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.
- 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
- 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.
- 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.
All institutional and Chancellor's Office personnel with fixed asset-related responsibilities should be knowledgeable of this policy.
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."
University and OUS Controller's Division responsibilities for building component depreciation include the following:
- 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.
- CONTROLLER'S DIVISION RESPONSIBILITIES:
- Developing accounting policies pertaining to building component depreciation.
- Maintaining and updating Banner Fixed Assets validation tables.
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.
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.
- All OUS institutions will utilize the same components and useful lives for buildings based on Asset Type, as defined by Banner Fixed Assets.
- Each OUS institution doing component depreciation shall determine which buildings on their respective campus will be componentized.
- When a building is componentized, all previous and subsequent capitalizations will be componentized.
- Additions to a componentized building will also be componentized.
- Capitalized improvements or remodels to a componentized building will also be componentized.
- 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.
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:
- CRITERIA
-
GENERAL COMPONENTS OF A BUILDING BUILDING COMPONENT ESTIMATED USEFUL LIFE
(in years)Building Shell Site Preparation 50Foundation 50Steel Frame 50Construction Exterior 50Floor Structure 50Walls-Exterior 50Roof Structure 50Building Finishes Roof Cover 20Construction Interior 20Floor Cover 20Building Services Systems Electric 23Heating, Ventilation & AC 23Plumbing 23Fire Protection 23Elevators 23Fixed Equipment Fixed Equipment 20 yr 20Fixed Equipment 15 yr 15Fixed Equipment 10 yr 10IT & Network Infrastructure 10 -
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.