Fixed Assets Building Component Depreciation Policy

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

• .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

  • 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.

   .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:

   

  1. 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. 
  2. 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.

  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.

  1. All OUS institutions will utilize the same components and useful lives for buildings based on Asset Type, as defined by Banner Fixed Assets.
  2. 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	BUILDING COMPONENT	ESTIMATED USEFUL LIFE (in years)
  Building Shell
  	Site Preparation	50
  	Foundation	50
  	Steel Frame	50
  	Construction Exterior	50
  	Floor Structure	50
  	Walls-Exterior	50
  	Roof Structure	50
  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

  .695  HISTORY

  07/02/04  Approved
  12/12/05 Revised
  01/19/06 Revised

  Policy Last Updated: 01/19/06

.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.

.995 HISTORY

08/01/06 Approved

Appendix Last Updated: 08/01/06