38.0 - Capital Assets Not Expected To Be Received in Current FY

SUBJECT:	Capital Assets Not Expected to be Received in Current FY
SOURCE:	Capital Asset Management
ORIGINAL DATE OF ISSUE:	November 2006
DATE OF LAST REVISION:	February 2022
CSOP NO:	38.0
RATIONALE:	To provide direction to university departments for the procurement of capital assets not expected to be received in the current fiscal year.
CSOP:	Notifying CAMS that a procurement order is not expected to be received in the current fiscal year Identifying purchase orders of capital assets not expected to be received in the current fiscal year Capital assets at Indiana University are held as construction in progress and do not begin depreciating until they are placed into service as fully operational assets. Capital assets may be purchased and invoiced in the current fiscal year but shipment does not take place until the next fiscal year. The best practice for identifying procurement orders not expected to be received in the current fiscal year is to determine the delivery date. The vendor should be able to provide an anticipated delivery date. If the supplier indicates your procurement order will not be received at IU until after June 30th of the current fiscal year, then the asset will be capitalized as construction in progress. Asset type code 40004 Moveable assets not yet received or placed in service will be assigned when the asset is created. There are two conditions in which capital assets are held as construction in progress. The equipment will not be received within the current fiscal year, regardless of when payment was made. Equipment has been received, but will not be placed into service. Examples A piece of equipment is delivered to IU but can not be installed in its current location due to the need for building modifications to allow for the appropriate use of the equipment. A piece of equipment is delivered to IU and purchased under a warranty agreement in which the vendor must physically unpack and install the equipment at IU before the warranty is valid. Notifying CAMS that a procurement order is not expected to be received in the current fiscal year. On the Asset Configuration Document, if item will not be received or placed in service in the current fiscal year as identified from the conditions above select 'No' to question 'Asset to be placed in Service within 30 days of receiving it from the supplier'. This will set the asset type code to 40004, which identifies the capital asset as "in progress" until the asset has been received and is fully operational. Selecting ‘No’ will require an expected in-service date, which must be greater than 30 days. The University Capital Asset Office uses the 40004 asset type code to generate a report to identify those assets that have not been received. When the capital asset is received and tagged, the University Capital Asset Office will reach out to the department and confirm the production status of the asset. Once the asset is confirmed as being operational, we will change the in-service date to the date provided by the department or the date the asset was tagged and assign the appropriate asset type code for that type of equipment. This action will begin depreciation of the asset. Identifying purchase orders of capital assets not expected to be received in the current fiscal year In accordance with Generally Accepted Accounting Principles, it is required that assets are not depreciated until they have been received and are fully operational. If an organization determines that a capital asset will not be received or will not be fully operational in the current fiscal year, the organization should indicate the reason and the actual or approximate date the asset will be delivered and/or is fully operational on the Org Text line of the asset on the Capital Asset Maintenance screen. The organization should also notify capasset@iu.edu that the asset will not be received or will not be fully operational in the current fiscal year. If an asset has incurred depreciation, but has not been received or is not fully operational, the University Capital Asset Office will back out the depreciation expense and change the asset type code to 40004. If depreciation has not been incurred on the asset the University Capital Asset Office will change the asset type code to 40004. Tagging a construction in progress asset: When the asset type code is 40004 it should only be changed by the University Capital Asset Office. Update the organization text to provide the production status. If the asset is in use, format the text with something like - In-service date is 7/1/2022. If the asset is not in use, format the text with - Not in-service, expected in-service date is 7/1/2023.
DEFINITIONS:	Capital Equipment- must have an acquisition value of at least $5,000 and a useful life expectancy of one year or more. Depreciation- The periodic charge to income that results from a systematic and rational allocation of cost over the life of a tangible asset. Equipment- The term “equipment” includes delivery equipment, office equipment, machinery, furniture and fixtures, factory equipment and similar fixed assets. In-Service Date- The date the asset was fully operational or made available for use.
CROSS REFERENCES:	CSOP 8.0 Capitalization of Movable Equipment CSOP 16.0 Movable Equipment –Construction in Process to Complete
RESPONSIBLE ORGANIZATION:	Organizations that purchase capital assets.