To outline procedures for fabrication (assembly) of a capitalized equipment unit.
Transformation of materials (supplies and minor equipment) into an identifiable unit by fabrication and meets the following criteria:
- Total finished value =>$5,000 and has a useful life of > 1 year.
- The ownership or title-to code must be the same for the entire fabricated unit. Funding sources can not be mixed so part of the fabricated unit is owned by the Federal Government or another outside entity and the remaining part(s) is owned by the university.
- Free standing, movable as an entire unit, not permanently attached to a structure, and will not lose its identity when installed in other property.
- Unit must be complete in itself. It will be added to, accounted for, and removed from capital inventory as one unit or record. All pieces stay together until entire unit is surplused.
- Assembled parts must be integrated, permanently attached to each other, and essential in the performance of the unit. A basic schematic diagram with a description must show how the parts are integral to the unit.
- A fabricated unit with all assembled parts must be physically found in one location at all times. Parts which do not meet this requirement are considered individually for capitalization.
Fabricated, assembled or constructed equipment that meets the above definition will be capitalized and added to the equipment inventory. The faculty member and department will be responsible for pre-approval prior to purchasing of any parts or items for the fabricated unit. This includes a basic schematic diagram of the proposed fabricated unit with explanations of the integration of the parts (see Procedures section).
Costs to assemble or fabricate can include parts, shipping costs, and labor of an organized shop. Faculty time may not be included. Donated parts will be recorded at fair market value. (See Procedures below for details).
Network and communication wiring can not be capitalized as equipment. This is infrastructure and special rules apply. Contact Property Administration if you have questions concerning these costs.
Software that is leased or licensed for use and which is separately itemized on a vendor invoice can not be capitalized. Do not include this expense in a fabricated unit cost.
Once a fabricated unit has been initially completed and placed in service, all replacement items, parts, or pieces to upgrade or enhance the unit will be expensed.
Example: a battery is replaced with a more powerful battery. The new battery must be purchased as an expense using Account Code “23501 Equipment Maintenance & Repairs”. [Note: the original battery remains on inventory and depreciates as part of the fabricated unit.]
OSU may receive special grant or contract funding to assemble and test a specialized piece of equipment which has not been previously constructed. These prototype units are unique experimental pieces of equipment which are designed for a specific purpose. There is a testing period. Even though on the fixed asset inventory as an asset, the unit should not be coded as “in-use” until the testing period is completed or the end date of the grant/contract; which ever comes first. If the item is found to be non-functional after the testing period, it must be removed from inventory.
Removal of a fabricated unit from fixed asset inventory:
When a fabricated unit is no longer in-service as it was designed and the department wants to surplus the parts or use some of them for another purpose the asset record must be removed from the fixed asset inventory and any remaining depreciation expensed to the university. These parts can not be added back to inventory as a single asset or part of a newly fabricated unit.
Transfer of Equipment Into OSU
|Faculty Member & Department
- Prepare Fabricated Equipment Unit Pre-approval form and basic schematic diagram with an explanation of the integration of the parts.
- Present the completed, signed form and schematic diagram to OSU Property Administration (Business Services) for review and approval. Property Administration will review the application within 24 hours of receipt.
- a. If the cost of the fabricated unit is part of a sponsored proposal, the approved form and schematic should accompany the Proposal Transmittal Form presented to Office of Sponsored Programs and Research Compliance (OSPRC).
b. If the fabricated unit is to be funded with Research Equipment Reserve Funds (RERF), the approved form and schematic must accompany the funding application to the Research Office for approval by the Research Council.
c. If the fabricated unit is to be funded with other funding, the approved form is to be maintained at the department business office.
- Once funding is approved, Purchase Requests may be processed. A copy of the approved Fabricated Equipment Unit form (with the funding indexes noted) with the basic schematic diagram attached should accompany the first Purchase Request to the PaCS office.
- Begin fabricating the unit. (Note: approval is required when using sponsored funds. On the grant index, look for a dollar amount budgeted as account code 40101 Equipment.)
- a. Process all vendor invoices using account code 40199 for all parts associated with the construction of the unit.
b. External shop labor invoices should be processed using account code 24995 Construction Contract Services due to IRS 1099 reporting requirements for services received. After processing these invoices through Accounts Payable, complete a Journal Voucher (JV), with the appropriate text, to change the account code to 40199.
c. If fabrication includes OSU shop labor, prepare a Journal Voucher (JV) to debit account 40199 on the funding source and credit account 79343 on the shop index.
- When fabrication is complete or at fiscal year-end, whichever comes first, costs must be redistributed by JV from account code 40199 to account code 40101 so the asset record can be created. The text field of the JV must have the necessary information to create the asset record, including the original “I” doc numbers. The asset will be capitalized as a CIP (Construction in Progress) unless it is completed and in-use. [See FIS 601 Equipment for additional reference.]
- If the asset is “CIP” (Construction-in-process), any additional costs in the new fiscal year should continue to be processed on account code 40199 and converted to account code 40101or A80xx for an auxiliary or service center at completion or fiscal year-end.
- When construction is complete and the asset is in use, process a final journal voucher to convert any remaining costs from account code 40199 to the equipment account code 40101. Include the in-service date in the text of the JV. All modifications after asset is placed in service must be expensed.
- Receives the Fabrication Equipment Unit Pre-approval form and basic schematic diagram from the faculty member/department.
- Reviews and returns the pre-approval form within 24 hours of receipt. Retains a copy for future reference.
- Approves Journal Vouchers which move costs from account code 40199 to account code 40101 or A80xx.
- At fiscal year-end, creates the capital inventory record as “CIP” until the unit is placed in-service or use.
- Issues a Bar Code Tag to the department for the fabricated unit.
- Requests a detailed update annually from the department for all assets that are still coded “CIP."