Acquiring and Capitalizing Real Property

Directive Statement

This directive establishes the proper methods of acquiring and capitalizing real property.  All construction costs are identified and tracked by Construction Accounting.  Once the project is completed, Construction Accounting will provide componentization information to Asset Management for recording the asset’s cost into the University’s Property Management System.  In accordance with statutory provisions and Generally Accepted Accounting Principles (GAAP), the University will capitalize and include in its real property records the following:

For construction projects beginning on or after July 1st, 2008:

  1. All land purchases, donations, exchanges, etc.
  2. The original cost to construct new buildings
  3. The costs related to renovation projects which adds new square footage
  4. The costs to a renovation project which extends the useful life of a COMPONENT part (i.e. roof, plumbing, electrical, etc.) of the building by two or more years, and meets one or both of the following criteria:
    • The costs are $250,000 or more
    • The costs are 25% or more than the original cost of the building

For construction projects beginning on or before June 30th, 2008:

  1. All new construction
  2. Remodeling, renovation, and major repair projects with total cost of $100,000 or greater or 25% or more of the building value. Total cost will include all professional fees, contingencies, materials, etc. associated with the project. Purchases of tangible personal property (OCO) are not included in the evaluation of project costs for capitalization purposes
  3. All land purchases, donations, exchanges, etc.
  4. The Construction Accounting Department, with the approval of the Senior Associate Controller, may capitalize projects costing under $100,000 if a determination is made that the completion of the project will substantially extend the useful life or substantially improve the use of the building. In such instances, the costs of the project will be added to the real property records. Purchases of tangible personal property (OCO) are not included in the evaluation of project costs for capitalization purposes

Note:  Total costs include all professional fees, contingencies, materials, etc.  Excluded costs include tangible personal property and asbestos abatement costs.

Reason for Directive

To adhere to Generally Accepted Accounting Principles (GAAP) and other regulatory requirements.

Who must comply?

All University departments.

Procedures & Best Practices

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