GAP 200.090, Plant & Equipment Depreciation

  1. General
  2. Depreciation Calculation
  3. Depreciation Recorded on General Ledger
  4. General Guidelines For Depreciable Life

 


 

I. GENERAL

Depreciation is an allocation of the cost of tangible property over its estimated useful life in a systematic and rational manner. Duke calculates and reports depreciation in accordance with Generally Accepted Accounting Principals.

 

II. DEPRECIATION CALCULATION

Depreciation is calculated using the Fixed Assets module within the SAP system. Duke uses the straight-line method, calculated on a monthly basis. For newly acquired items, depreciation is calculated beginning the month following the acquisition. For custom built or constructed equipment or facilities, depreciation calculation begins one month after the item is put into service. When an item is disposed of, depreciation is taken through the month of disposal.

The depreciable life for an item is based on its "useful life." Plant Accounting uses many resources to help assist in the determination of "useful life". Two main resources for this are the American Hospital Association guidelines, and recommendations from American Appraisal. In addition to the recommendations from these resources, Plant Accounting takes into account technological obsolescence and utilization. The guidelines in section IV are a result of these general determinations. Due to the unique nature of many assets purchased, individually significant items are reviewed for depreciable life as needed. In these situations, Plant Accounting looks at comparable guidelines as well as consulting with the vendor the item was purchased from and the department that will be using the piece of equipment.

When the accumulated depreciation equals the original cost, no further depreciation is accrued; however, both the balance of first cost and the reserve remain on the books until the item is disposed. When the item is dismantled, demolished, sold, or otherwise disposed, the cost of the item and accumulated depreciation are removed from the ledger.

 

III. DEPRECIATION RECORDED ON GENERAL LEDGER

Within the University, depreciation expense is posted at the company level in SAP. Within DUHS, depreciation expense is posted to either a departmental cost center or a building cost center.

Within the Fixed Assets module of SAP, each building in its entirety must belong to only one company. However some buildings are actually shared. This sharing of space is recorded in the institutional space system often referred to as Web Central. Within SAP, all of the depreciation for a building is charged to the "owning" company. Plant Accounting then uses an SAP allocation process to move the monthly depreciation expense to the appropriate company. Equipment also can only belong to one company in SAP, in the rare situations where a major piece of equipment must be allocated between companies; Plant Accounting uses the above reference process to allocate the depreciation expense each month.

If upon review of the financial records, it appears that depreciation is being charged to the wrong cost center the department should bring this to the attention of Plant Accounting. Journal Entries are not to be made to the depreciation G/L accounts, corrections are made by Plant Accounting through the Fixed Assets module; this will fix previous mispostings and will post the future charges correctly.

 

IV. GENERAL GUIDELINES FOR DEPRECIABLE LIFE

 

Fixed Assets:  
Normal
Depreciable Life
Land & Land Improvements  
   170100 Land  
Not Depreciable
   170200 Land Improvements  
5 - 20 years
   
Buildings  

   171000 Buildings

 

 

Category I
Fire resistant bearing walls, column beams, floor and roof deck

 
80 years

Category II
Same as Cat. I, except walls are precast stucco panels with metalstuds and gypsum wallboard

 
50 years

Category III
Exterior bearing and non-bearing walls and partitions, floors and roofs are wholly or partly wood

 
30 years

Category IV
Same as Cat. III, except the exterior outside wall is wood or metal

 
20 years

Category V
Greenhouses, tool sheds, fuel storage facilities, etc.

 
10 years

Category VI
Solid brick and concrete masonry exterior walls

 
60 years

Category VII
Exterior walls and partitions or interior walls are fire resistant

 
40 years
   
Utilities & Building Appurtenances  
   172100 Building Service Machinery and Equipment  
10 - 25 years
   172200 Other Building Facilities  
5 - 20 years
   172300 Inside Piping and Wiring  
10 - 20 years
   172400 Outside Piping and Wiring  
25 years
   172700 Permanent Interior Furnishings  
5 years
   
Unfinished Plant & Equipment  
   178000 Asset Under Construction - Buildings  
Not Depreciable
   
Duke Communication System (TEL-COM)  
   178600 Station Apparatus  
15 years
   178700 Station Connections  
10 years
   178800 Central Office (Switcher)  
30 years
   178900 Large Private Branch Exchange  
15 years
   179000 Underground Cable  
35 years
   179100 Buried Cable  
25 years
   179400 Cablevision Apparatus  
15 years
   179500 Underground Conduit and Manholes  
60 years
   179600 Microwave Equipment  
20 years
   179700 Microwave Tower  
25 years
   
   
Movable Assets:  
Normal Depreciable Life
Ships and Vessels  
   174000 Ships and Vessels - Inboard Powered  
20 years
   174000 Ships and Vessels - Outboard Powered  
5 years
   
Machinery and Equipment  
   175000 Machinery and Equipment  
Various
   
Vehicles  
   175100 Vehicles - Heavy  
8 years
   175100 Vehicles - Light  
4 years
   175100 Vehicles - P. R. T. Cars  
12 years
   
Library  
   176100-176800 General Acquisitions  
1 year
   
Furniture, Furnishings, Office Machines & Equipment  
   177100 Furniture and Furnishings  
10-15 years
   177200 Office Machines and Equipment  
5 years
   177500 Construction/Renovation Minor Capital Acquisitions  
3 -7 years
   
Computers and Software  
   177300 Midrange and Mainframe Computers  
4 - 5 years
   177400 Personal Computers  
4 years
   177600 Computer Software  
5 years
   177700 Major Computer Software  
7 years
   
Non-Depreciable  
   174600 Agency Owned Real Property  
Not Depreciable
   174700 Government Owned Property  
Not Depreciable
   174800 Agency Owned Personal Property  
Not Depreciable
   176900 Fine Art  
Not Depreciable
   178300 Asset Under Construction - Equipment  
Not Depreciable