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Fixed Assets Building Component Depreciation Policy

Section: Fixed Assets Administration Number: 55.110
Title: Fixed Assets Building Component Depreciation Policy

Index

POLICY

APPENDIX


  • POLICY

  • .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

     

    .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.  

    3. 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 BUILDINGBUILDING COMPONENTESTIMATED 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

     

  •  

    Direct questions about this policy to the following offices:

    Subject Contact
    General questions from institutional personnel Institution Office of Business Affairs
    General questions from institutional central administration and Chancellor's Office personnel Chancellor's Office Controller's Division

     

    .695  HISTORY

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

    Policy Last Updated: 01/19/06

     


    APPENDIX

    .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.

    GENERAL COMPONENTS OF A BUILDING BUILDING COMPONENTESTIMATED USEFUL LIFE (in years) User Defined Code Asset Type Codes
    Componentized Buildings
    Major Improvements to Componentized Buildings
    Gen Ed, Admin, Instr & Research
    Library Museums
    Gen Ed, Admin, Instr & Research
    Library Museums
    Building Shell              
      Site Preparation
    50
    SP
    HG
    HL
    JG
    JL
      Foundation
    50
    FD
    HG
    HL
    JG
    JL
      Steel Frame
    50
    SF
    HG
    HL
    JG
    JL
      Construction Exterior
    50
    CE
    HG
    HL
    JG
    JL
      Floor Structure
    50
    FS
    HG
    HL
    JG
    JL
      Walls-Exterior
    50
    WE
    HG
    HL
    JG
    JL
      Roof Structure
    50
    RS
    HG
    HL
    JG
    JL
    Building Finishes              
      Roof Cover
    20
    RC
    OG
    OL
    PG
    PL
      Construction Interior
    20
    CI
    OG
    OL
    PG
    PL
      Floor Cover
    20
    FL
    OG
    OL
    PG
    PL
    Building Services Systems              
      Electric
    23
    EL
    KG
    KL
    MG
    ML
      Heating, Ventilation & AC
    23
    HV
    KG
    KL
    MG
    ML
      Plumbing
    23
    PG
    KG
    KL
    MG
    ML
      Fire Protection
    23
    FP
    KG
    KL
    MG
    ML
      Elevators
    23
    EV
    KG
    KL
    MG
    ML
    Fixed Equipment              
      Fixed Equipment
    20 yr
    20
    FA
    OG
    OL
    PG
    PL
      Fixed Equipment
    15 yr
    15
    FB
    QG
    QL
    RG
    RL
      Fixed Equipment
    10 yr
    10
    FC
    SG
    SL
    TG
    TL
      IT & Network Infrastructure
    10
    FI
    SG
    SL
    TG
    TL

     

    .995 HISTORY

    08/01/06 Approved

    Appendix Last Updated: 08/01/06