Equipment Threshold Increase (7/1/04) Question & Answers

The $1,500 threshold for capitalization of software will also be increased to $5,000 effective July 1, 2004.

1. To reduce the administrative costs of recording and tracking items of equipment. The reduction is needed, especially in these times of budgetary constraint.

2. By eliminating the requirement to record and track relatively low valued items, more attention and effort can be given to safeguarding the remaining, higher valued equipment items. This should enhance the university's overall control and stewardship of its assets and promote our compliance with external regulations and university policy and procedures.

1. Two new object codes will be required in addition to the change in the definition of equipment.

   Object Code 811E: Items with useful life of more than one year and unit value between $200 and $1,499.99. This new object code is needed to support the University's request for state funds for instructional equipment replacement and capital programs.

   Object Code 812E: Items with useful life of more than one year and unit value between $1,500 and $4,999.99. This code will be used to exclude these expenditures from the assessment of indirect costs during FY 2004-05 and 2005-06. It will also be used to support the University's request for state funds for instructional equipment replacement and capital programs.

   Object Codes 9000, 9100, 9213, 9235, 9900, 9950 (existing codes): Items with useful life of more than one year and unit value of $5,000 or more.

2. Entries will be made to write-off the acquisition value of fully depreciated items (fully depreciated as of June 30) with unit values between $1,500 and $4,999.99 acquired and capitalized in previous years.

The campus will write-off the items identified by UCOP to remove them from the inventory and the plant ledger. The write-off should be recorded as a disposal, without proceeds. However, these items will remain on your equipment listings for internal tracking purposes. You will be able to remove these items from the listing through the normal disposal recording process, as applicable.

However, during the next several years, items with unit acquisition value below $5,000, acquired before July 1, 2004 will remain on the inventory to reflect the prospective nature of this change. The physical verification requirement for these items is being waived to reduce the administrative burden associated with these relatively low value items. The waiver is also consistent with the change in the threshold, where new items below $5,000 will not be inventoried.

This exception is applicable only to items with unit acquisition value less than $5,000 that are not fully depreciated. Over the next several years, all items with unit values below $5,000 will have been permanently removed from the inventory.

Campus inventory systems facilitate university compliance with two sets of requirements. One set of custodial obligations pertains to equipment as defined by the university. The university also has custodial obligations for other property items, independent of the UC definition of equipment. For example, we are often contractually required to track and report property owned or loaned by an outside entity, regardless of the item's cost. We must meet both sets of obligations. This Q&A is primarily concerned with the impact of the threshold change on the treatment of equipment. Other property items such as theft sensitive and sponsor owned items requiring special treatment are described in BUS-29, Section A.VI.A.