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Business Procedures Manual

7.7 Equipment

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7.7.1 Equipment Definition

Equipment is either a fixed or movable tangible asset to be used for operations, the benefits of which extend beyond one year from date of acquisition and rendered into service. Improvements or additions to existing equipment that meet the capitalization threshold and increase the value or life of the asset by 25 percent of the original cost or life should be capitalized as a betterment and recorded as an addition of value to the existing asset using a parent/child asset management relationship. The useful life of the parent may be modified to reflect an increase in useful life.

The useful life of the addition or improvement (the “child”) should generally not exceed that of the original asset (the “parent”). However, if the improvement is not an integral part of the original asset, it may possess a different useful life than the parent asset. For example, new memory in an existing file server could possess a different useful life than its parent because if necessary, this memory could be moved to another file server.

For schedule of useful lives of capitalized assets, see Section 7.15.3.

Note: Costs of extended warranties and/or maintenance agreements that can be separately identified from the cost of the equipment should not be capitalized.


7.7.2 Jointly Funded Equipment

Equipment paid for jointly by the state and other governmental entities should be capitalized by the entity responsible for future maintenance.


7.7.3 Depreciation Methodology

The straight-line depreciation method (historical cost, divided by useful life) will be used for equipment.


7.7.4 Capitalization Threshold

The capitalization threshold for equipment is $5,000.

Note: Georgia State law still requires that a list of all equipment valued at $3,000.00 or more be maintained.

Institutions who have a multiple year cost allocation plan or an indirect cost proposal will not be required to implement the new threshold until such time that they renegotiate their cost allocation plan or indirect cost proposal with their federal cognizant agency, such as the U.S. Department of Health and Human Services.

Examples of expenditures to be capitalized as equipment include:

  • Original contract or invoice price
  • Freight charges
  • Import duties
  • Handling and storage charges
  • In-transit insurance charges
  • Sales, use, and other taxes imposed on the acquisition
  • Installation charges
  • Charges for testing and preparation for use
  • Costs of reconditioning used items when purchased
  • Parts and labor associated with the construction of equipment

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