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Frequently Asked Questions

for Facilities and Debt Planning

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Q. What is asset capitalization?

AnswerDefinition of asset qualifying for capitalization:

  • Acquisition cost of $5,000 or more per unit
  • Tangible property
  • Useful life at least two years
  • Capacity to function on its own (not a component unit of another asset)

Equipment and Inventory Policy

Capitalization Policy

Depreciation Policy

Q. What are equipment accounts?

AnswerEquipment Account Descriptions:

  • 4452—Software—All software should be charged to this account regardless of cost.
  • 4865—Technical Initiatives—Computers and related hardware costing less than $5,000 and that are not purchased with a procurement card or through TotalTECH.
  • 4997—Internal Service Equipment less than $5,000—TotalTECH purchases costing less than $5,000.
  • 4481—Office Supplies—Equipment costing less than $5,000.
  • 4850—Equipment equal to or more than $5,000—Equipment costing at least $5,000.
  • 8980—Miscellaneous Income—Proceeds received from the sale of equipment.

Q. What equipment qualifies for capitalization?

AnswerEquipment qualifying for capitalization:

  • Acquisition cost of $5,000 or more per unit
  • Tangible property
  • Useful life of at least 2 years
  • Capacity to function on its own (not a component unit of another asset)

Q. Should repairs and maintenance be capitalized?

AnswerThese costs should be expensed and include such items as painting, carpet replacement, cleaning buildings and machinery and replacing minor parts.

Q. Are improvements and replacements capitalized?

AnswerThe cost should be capitalized if it exceeds $100,000 and meets one of the following criteria:

  1. The useful life of the asset is extended
  2. The quantity of services provided by the asset is increased
  3. The quality of services provided by the asset is enhanced
  • An improvement is the substitution of an asset currently in use with a better asset. (An old air conditioning unit is replaced with a more powerful and sophisticated air conditioning system)
  • A replacement is the substitution of an existing asset with a similar asset. (An old air conditioning unit is replaced with a new air conditioning system with essentially the same characteristics).

Q. Should donated assets by capitalized?

AnswerDonations that should be capitalized:

  • Land, buildings, equipment and library holdings received as a gift will be capitalized at the fair market or appraised value at the time of the gift.
  • Western Michigan University Foundation must be notified of all donated assets so that a gift receipt can be issued to the donor. This allows the donor to deduct the value of the donated asset on their income tax return.

Q. Does software need to be capitalized?

AnswerSoftware that should be capitalized:

  • Software that is purchased or licensed and modified using more than minimal incremental effort before being put into operation should be capitalized if the amount exceeds $250,000
  • Software developed internally should be capitalized if the cost of development and implementation exceeds $250,000

Q. Can I use 4xxx accounts with fund 63?

AnswerNo, 2xxx Accounts are used with fund 63. Contact Facilities and Debt Planning using the Contact Us link to the left with questions.

Q. What if I have questions about the GLOW balance for my fund 63 department?

AnswerPlease call Lori Prichard at 387-4231 or Cindy Zimmerman at 387-4570, or you may contact Facilities and Debt Planning using the Contact Us link to the left with questions.