GAP 200.040, Plant & Equipment Definitions, General Principles and Controls

Contents

1. General
2. Definitions of Terms
3. Asset Tags
4. Plan Records for Movable Assets
5. Movable Equipment Disposals
6. Fixed Plant & Equipment Demolishments
7. Interdepartmental Transfers
8. Intercompany Transfers
9. Control Procedures

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I. General

The SAP system is used for Duke University’s and Duke University Health System's (DUHS) general ledgers and their asset accounting sub-ledgers. The two systems work together to record all the transactions related to the acquisition, depreciation and ultimate retirement of all of Duke University’s and DUHS’s fixed assets. Requisitions for capital equipment should be made using the correct 66xxxx capital expense account. Purchase orders will be created initially using this same 66xxxx G/L account. Plant Accounting reviews all purchase documents using 66xxxx G/L accounts or any purchase order over $4,750 to screen for capital purchases. If an item is determined to be capital equipment, Plant Accounting will create the asset master record using the correct asset class. The asset class is linked to a balance sheet G/L account in the 17xxxx series. Plant Accounting will change the purchase document so that the item is linked to the asset master record. This means that all subsequent posting to that line item will automatically update the value on the asset master record and post to the correct fixed asset balance sheet G/L account (17xxxx). For DUHS entities this is all that is required. Assets will then depreciate monthly to the cost center on the asset master record. When necessary the retirement posting will remove the value from the related 17xxxx G/L account and also remove the accumulated depreciation from G/L account 180100 - Accumulated Depreciation.

In order to meet the needs of fund accounting for Duke University, one more entry is needed. The system will post an expense to the related 66xxxx G/L account when postings are made to the asset master record. This is typically the same one used on the requisition and initial purchase order. This will post a capital expense on a 66xxxx G/L account on the correct cost center or WBS element. This posting will reduce the fund balance of the individual fund, thus accomplishing the fund accounting necessary for Duke University, company code 0010.

Capital construction and renovation projects use the integration of the Project Systems module of SAP with the Fixed Asset module. A unique project definition is created in SAP for each capital project. Additionally, WBS elements will be created within the project definition to represent the various phases and asset types of the construction project. This methodology enhances the proper reporting and capitalization of construction / renovation projects.

Purchases, contractor payments, consultant fees and all other charges are posted to the correct WBS element for the project on specific G/L accounts. These G/L accounts are in the 6681xx range and are to be used only for capital construction/renovation projects. Projects are “settled” periodically to individual assets under construction records throughout the project. This settlement process is how the costs incurred on the project are posted to the G/L account for construction in progress. Settlement will post value to the asset under construction and to the balance sheet G/L account 178000 - Asset Under Construction-Buildings. The offset is to G/L account 800600 - Transfer from Project to Assets. For fund accounting purposes, the offset to G/L account 800600 is eliminated for company code 0010 - Duke University.

For information on Plant and Equipment Depreciation, refer to GAP 200.090, Plant & Equipment Depreciation. For information on Plant and Equipment Capitalization, refer to GAP 200.050, Plant & Equipment Capitalization Policy.

II. Definition of Terms

The definitions that relate specifically to the accounting for items of Plant and Equipment are presented below to afford a better understanding of later sections of the Plant and Equipment procedures.

Movable Assets

Consists of furniture and equipment that are not part of the supporting structure of a building and that meet the specific criteria for capital assets.

Fixed Assets

Consists of land and buildings that include new construction, alterations and renovation projects that meet the specific criteria for fixed capital assets. Fixed assets also include equipment that is usually attached and integral to the building’s function, although it might have a shorter life than that of the building.

First Cost

Represents the capitalized value of each item of Plant and Equipment

Net Book Value

Represents first cost of Plant and Equipment, less Accumulated Depreciation

Asset Tag Number

A metal tag applied to movable assets that carry a control number for identification purposes. Items that cannot physically carry a metal tag have an assigned number.

Building Number

Fixed assets are grouped under building numbers for control and identification purposes.

III. Asset Tags

As a general principle, all Plant and Equipment items will be identified as separate and distinct units and will remain so throughout their useful lives. All capital assets including building components and fixed assets have a unique identification number.

All capital moveable equipment is tagged with a numbered property tag designating Duke University or Duke University Health System responsibility. Items too sensitive, small or otherwise impractical to tag are not physically tagged but still have the unique number identification.

In the case of fixed assets such as roads and sidewalks, land improvements, piping and wiring systems and certain room furnishings (rugs and drapes), the affixing of an asset tag is generally impractical, if not impossible. In these cases, it is recommended that the items be separated according to the functional units or geographic locations and so identified in the Plant and Equipment records.

IV. Plant Records for Movable Assets

Plant Accounting maintains records for each item, which include the following information:

• Tag Number
• Description of Item
• Manufacturer's Serial Number (if any)
• Location (Building and floor)
• Room
• Responsible cost center
• Purchase Order or other relevant document
• Capitalized on Date
• First Acquisition date
• Asset Class
• Source of Funds
• Depreciation Start Date
• Useful Life

For each asset, the following values are available:

• Acquisition Value
• Depreciation Carry forward
• Depreciation Current year
• Net Book value

Values are usually represented as of the end of the current fiscal year, unless otherwise requested.

V. Movable Equipment Disposals

A disposal is recorded whenever an item is physically disposed of (by sale, scrapping, or otherwise). A disposal is not recorded for equipment placed in standby or idle status or for the dismantlement of a portion of a unit. Equipment no longer needed by a department should be handled by the Duke Surplus Program. The department should use the online asset disposition tool.  All unneeded property, regardless of the funding source, should be turned over to the Duke Surplus Program.  This includes any property acquired with federal or other restricted funds.  The online tool can be found via the Procurement website. Duke Surplus Store notifies Plant Accounting regularly about the receipt and ultimate disposition of all equipment turned over to them. Equipment will generally either be retired or recycled within a short period of time.

A disposal is also recorded for equipment not located for two consecutive physical inventories of a department’s moveable equipment. Results of all departmental moveable equipment inventories are sent to the Department Head, Management Center and Internal Audit.

When a disposal is made, the appropriate asset is retired and the system makes the related entries to remove the related amounts from the balance sheet G/L accounts. The appropriate 17xxxx G/L account is credited and the accumulated depreciation amount is removed from G/L account 180100 - Accumulated Depreciation. Any remaining book value is charged to G/L account 695601 - Losses, Damages & Other Write-Offs. When depreciation is calculated, it is calculated through the month of disposal.

VI. Fixed Plant & Equipment Demolishments

Demolishments are recorded whenever a building or structure is physically torn down, and the materials are disposed of (by sale, scrapping, or otherwise). A demolishment is not recorded for a building or structure placed in stand-by or idle status or for the demolishment of a portion of a structure. Entries are done as needed to the relevant 17xxxx, 180100 - Accumulated Depreciation and 695601 - Losses, Damages & Other Write-Offs G/L accounts as needed. Depreciation is taken on the asset(s) through the month of demolishment.

VII. Interdepartmental Transfers (Intra-Company)

One department may wish to transfer a capital item to another department, either with or without revenue realized from the transaction. The Duke Surplus Program coordinates these types of transactions with the departments and Plant Accounting, using G/L account 750900 - Transfers of Funds Between Departments for the Purchase of Capital Equipment. The G/L account is used on both sides of the transaction. No changes are made to the first cost, accumulated depreciation or the original source of funds; therefore, at year-end all current year depreciation is attributed to the cost object to which the asset has been transferred.

VIII. Intercompany Transfers

Transferring assets between companies requires the creation of a new asset in the receiving company’s books. As such, all inter-company transfers must be performed by Plant Accounting. Transfers will remove the related 17xxxx amount from the sending company’s balance sheet account as well as remove the related accumulated depreciation from 180100 - Accumulated Depreciation. The receiving company will get an increase in the 17xxxx G/L account as well as a posting to 180100 - Accumulated Depreciation. Balancing entries for each company code are posted to 831000 - Intercompany Transfer of Assets.

IX. Control Procedures

The Vice President of Financial Services will establish procedures for the control of Duke’s investment in Plant and Equipment, including:

• Review of all related accounting data submitted in support of requests for plant appropriations.
• Maintenance of records for each capitalized item in agreement with the book balances of each asset G/L account established for Plant and Equipment and related reserves for depreciation.
• Verification of the accuracy of records for each capitalized item by a physical inventory at least once every 24 months.
• Procedures for recycling or disposing of capitalized items to ensure that:
  1. Proper control over physical disposition is maintained
  2. Competitive bids are obtained, and
  3. Adequate supporting records are kept in connection with the sale (or trade) of used machinery and equipment.