Capitalization Policy and Depreciation Policy for Capital Assets

All assets meeting the definition of a fixed asset shall be considered a long-term asset and shall
be recorded in the State University Fixed Asset Accounting System (SFAAS).  SUNY and its
related entities are responsible to account for all long-term assets under its jurisdiction.  Such
assets shall be systematically and accurately recorded; properly classified; and adequately
documented in the SFAAS.  All entities shall establish an internal control structure over fixed
assets that provides reasonable assurance of effective and efficient operations, reliable financial
reporting, and compliance with applicable laws and regulations.
Asset Valuation
Fixed assets shall be recorded at historic cost or, if the cost is not readily determined, at
estimated historic costs.  Cost shall include applicable ancillary costs.  All costs shall be
documented, including methods and sources used to establish any estimated costs.  In the case of
gifts, the fixed asset should be recorded at fair market value at the date of receipt.
1. Purchased Assets – The recording of purchased assets shall be made on the basis of actual costs,
including all ancillary costs, based on vendor invoice or other supporting documentation.
2. Constructed Assets – All direct costs (including labor) associated with the construction project
shall be included in establishing the asset valuation.
3. Donated Assets – Fixed assets acquired by gift, donation, or payment of a nominal sum not
reflective of the asset’s market value shall be assigned cost equal to the fair market value at the
time of receipt.
Asset Salvage Value
The salvage value of an asset is the value it is expected to have when it is no longer useful for its
intended purpose.  In other words, the salvage value is the amount for which the asset could be
sold at the end of its useful life.  This value can be based on (1) general guidelines from some
professional organizations such as GFOA, (2) internal experience, or (3) professionals such as
engineers, architects, etc.
Asset Classification
Fixed assets should be categorized into the following:
 Land
 Land improvements and infrastructure
 Buildings/Facilities
 Equipment, library books, and artwork
 Construction in progress
 Intangible Assets
General Policy for Capitalization
Fixed assets should be capitalized as follows:
 All land acquisitions
 All buildings/facilities acquisitions and new construction
 Facility  renovation and improvement projects costing more than $100,000
 Land improvement and infrastructure projects costing more than $100,000
 Equipment costing more than $5,000 with a useful life beyond a single reporting period
(generally one year)
 Purchases of equipment and facilities  acquired through a debt financing arrangement meeting
the capital lease criteria under SFAS No. 13 (i.e., COPS,TELP, private  financing, Statewide
 Lease/Purchase Agreement, etc.) should be considered for capitalization.  In general, for
equipment, any such lease arrangement in excess of $5,000 regardless of whether individual
items under lease arrangement do not qualify as a fixed asset based on the $5,000 threshold.
 Capitalized interest incurred on new construction, rehabilitation or improvement projects
costing in excess of $100,000
 Computer software costing more than $5,000 with a useful life beyond a single reporting period
 Intangible assets of internally generated computer software and all other intangible assets
costing more than $1,000,000 All library books and artwork
 Construction in Progress (CIP) for capital projects with a budget in excess of $100,000
Land Acquisitions
The recorded cost of land includes (1) the contract price; (2) the costs of closing the transaction
and obtaining title, including commissions, options, legal fees, title search, insurance, and past
due taxes; (3) the costs of surveys; and (4) the cost of preparing the land for its particular use
such as clearing and grading.  If the land is purchased for the purpose of constructing a building,
all costs incurred up to the excavation for the new building should be considered land costs. 
Removal of an old building, clearing, grading and filling are considered land costs because they
are necessary to get the land in condition for its intended purpose.  Any proceeds obtained in the
process of getting the land ready for its intended use, such as salvage receipts on the demolition
of the old building or the sale of cleared timber, are treated as reductions in the price of the land. 
Capitalization of land costs include, but are not limited to, the following:
 Original contract price
 Brokers’ commissions
 Legal fees for examining and recording title
 Cost of title guarantee insurance policies
 Cost of real estate surveys
 Cost of an option when it is exercised
 Special paving assessments
 Cost of excavation, grading or filling of land and razing of an old building
 Cost of cancellation of unexpired lease
 Payment of noncurrent taxes accrued on the land at date of purchase, if payable by purchaser
Buildings/Facilities
Capitalization of facilities costs include, but are not limited to, the following:
 Original contract price of asset acquired or cost of design and construction
 Expenses incurred in remodeling, reconditioning, or altering a purchased building to make it
available for the purpose for which it was acquired.
 Expenses incurred for the preparation of plans, specifications, blueprints, etc.
 Cost of building permits
 Payment of noncurrent taxes accrued on the building at date of purchase, if payable by
purchaser
 Architects’ and engineers’ fees for design and supervision
 Costs of temporary facilities used during the construction period
Each building or addition of square footage to an existing building acquired or constructed is
divided into 10 major building components.  The components are as follows:
1. General construction
2. Site preparation (this component is classified as land on the financial statements)
3. Roof and drainage
 4. Interior construction
5. Plumbing
6. Heating, ventilation, and air conditioning
7. Electrical
8. Fire protection
9. Elevators
10. Miscellaneous
The total cost of the building or additional square footage is then allocated among the 10 major
building components.  Projects such as building construction included in the fixed asset value of
the building, the cost of professional fees (architect and engineering), permits and other
expenditures necessary to place the asset in its intended location and condition for use should be
capitalized.
Furthermore, the cost of interest incurred during building construction should be capitalized as
described below under capitalized interest costs.
Building Renovations/Rehabilitation
A building renovation is defined as enhancements made to a previously existing building
component.  Any renovation to a building must at a minimum meet the following criteria to
qualify as a fixed asset:
1. The total project cost must be more than $100,000
2. The renovation must extend the useful life or capacity of the asset
Building Improvements
An improvement to a building is defined as adding a new component where one did not
previously exist.  The improvement must cost more than $100,000 and have an initial useful life
extending beyond a single reporting period (generally one-year).
Land Improvements and Infrastructure
Land improvements include items such as excavation, non-infrastructure utility installation,
driveways, sidewalks, parking lots, flagpoles, retaining walls, fencing, outdoor lighting, and
other non-building improvements intended to make the land ready for its intended purpose. 
Land improvements can be further categorized as non-exhaustible and exhaustible.  Expenditures
for land improvements that do not deteriorate with use or passage of time are additions to the
cost of land and are generally not exhaustible, and therefore not depreciable.
Infrastructure assets are defined as long-lived capital assets that normally are stationary in nature
and normally can be preserved for a significantly greater number of years than most capital
assets.  Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water
and sewer systems, dams, and lighting systems.
Improvements to infrastructure or land improvements which extend the useful life or capacity of
the asset and meet capitalization thresholds will be capitalized as a separate asset/component and
depreciated over its estimated useful life
Equipment
 Equipment qualifying as a capital asset is defined as a single item with an acquisition cost of
$5,000 or more and has a useful life beyond one year.  Capitalization of equipment costs include
but are not limited to, the following:Original contract or invoice cost
 Freight, import duties, handling and storage costs
 Specific in-transit insurance charges
 Sales, use and other taxes imposed on the purchase
  Costs of preparation of foundations and other costs in connection with making a proper site for
the assets
 Installation charges
 Costs for reconditioning used equipment to make it usable for the purpose it was purchased
Improvements to existing equipment assets which extend the useful life or capacity of the asset
and meet capitalization thresholds will be capitalized as a separate asset/component and
depreciated over its estimated useful life.
Leased Equipment and Facilities
Leased equipment and facilities should be capitalized if the lease agreement meets any one of the
four criteria below.  Also, a contractual lease obligation for a facility, that at its inception, meets
any of the following four criteria, should be capitalized:
 The lease transfer ownership of the property to the University by the end of the lease term.
 The lease contains a bargain purchase option.
 The lease term is equal to 75 percent or more of the estimated economic life of the leased
property.
 The present value of the lease payments at the inception of the lease, excluding executory costs,
equals at least 90 percent of the fair value of the leased property.
Leases that do not meet any of the above requirements should be recorded as an operating lease.
Capitalized Interest Costs:
The University will capitalize interest costs based on the criteria outlined in FASB Statements
Nos. 34 and 62.  The objective of capitalizing interest is to obtain a measure of the acquisition
cost that more closely reflects the University’s total investment in the asset.
The amount of interest capitalized should theoretically be the amount of interest charged during
the assets acquisition period that could have been avoided if the assets had not been acquired, or
had not been acquired without incurring debt. As required under FASB Statement No. 62
involving tax-exempt borrowings, interest costs will be offset by interest income.   As such, the
amount of interest cost capitalized is all interest cost of the borrowing less any interest earned on
related interest-bearing investments acquired with proceeds of the related tax-exempt borrowing
from the date of the borrowing until the assets are ready for their intended use.
The capitalization period begins when the following three considerations are present:
 Expenditures for the capital asset have been made.
 Activities necessary to get the capital asset ready for its intended use are in progress.
 Interest costs are being incurred.
The amount capitalized should be an allocation of the net interest cost incurred during the period
required to complete the asset.  The interest rate for capitalization purposes is to be based on the
rates on the University’s outstanding borrowings.  If a specific new borrowing can be identified
with the asset, the rate on that borrowing should be used as the basis for allocating the interest
cost for the asset.  A weighted average of the rates on other borrowings is to be applied to
expenditures not covered by specific new borrowings.
Computer Software Purchased computer software costing more than $5,000 with a useful life
beyond a single reporting period (generally one-year) should be capitalized.
Intangible Assets
Intangible assets are those that lack physical substance, are non-financial in nature and have an
initial useful life extending beyond a single reporting period.  Intangible assets must be
identifiable, meaning they are either capable of being separated by means of sale, transfer,
license or rent, or they arise from contractual or other legal rights.
Intangible assets acquired or developed by the State University could include licensed software,
internally generated computer software and campus owned websites or portals.  Other examples
include patents, copyrights and trademarks, permits and licenses, easements, and land use rights
(e.g., water, timber or mineral rights).
The value of certain intangible assets, such as land use rights or easements, may already be
included in the reported value of the associated real property asset.  In these instances, although
the individual rights associated with the property are separable and intangible in nature,
collectively they represent the ownership of a tangible asset.  Therefore, the value of the
individual rights should remain aggregated and reported as a tangible capital asset, not separately
as an intangible asset (i.e, easements on University/State owned land should not be reported
separately, but be included in the reported land value).
Current policy requires purchased computer software costing greater than $5,000 to be
capitalized by the campus (i.e., entered in the Real Asset Management System).  The additional
recognition requirements for intangible assets apply to internally generated computer software. 
In this regard, the activities involved in creating (and/or significantly modifying commercially
available) software need to be evaluated to determine if the internal costs meet the criteria for
capitalization.
The software must be acquired, internally developed, or modified solely to meet internal needs
and there must not be a substantive plan to market the software externally to other organizations. 
Software development generally involves three phases. These phases and their characteristics are
as follows:
 Preliminary project phase -when conceptual formulation of alternatives, the evaluation of
alternatives, determination of existence of needed technologies and final selection of
alternatives is made.
 Application development phase -Design of chosen path including software configuration and
software interfaces, coding, installation of computer hardware and testing, including parallel
processing phase.
 Post-implementation/operation phase - training and application maintenance activities.
Costs associated with the preliminary project and the post-implementation/operating phases
should be expensed as incurred. Internal and external costs associated with the application
development phase should be capitalized. Costs to develop or obtain software that allows for
access or conversion of old data by new information systems should also be capitalized. Costs
incurred during the application development phase should be capitalized as an in progress asset
until the software is placed in service.  When the project is completed, the asset should be
reclassified as an intangible asset and should be capitalized and depreciated.  General and
administrative costs and overhead expenditures associated with software development should not
be capitalized as costs of internal use software.
Upgrades and enhancements are defined as modifications to existing internal-use software that
result in the ability for the software to perform tasks that it was previously incapable of
performing.  In order for costs of specified updates and enhancements to internal-use computer
software to be capitalized, it must be probable that those expenditures will result in additional
functionality, increased efficiency, or the extension of the estimated useful life.  If the
modification does not result in any of these outcomes, the costs should be considered routine
maintenance and be expensed as incurred.
Library Books
Purchased library books should be recorded at cost.  Generally, library books acquired by
contribution would be recorded at fair market value.  The University uses a “layered”
depreciation procedure for library books, where an annual layer for books/volumes
purchased/donated is maintained. Although not maintained in the fixed asset accounting system,
the useful life of library books, reference materials and information sources other than library
books will be 10 years. As such, a 10 percent charge would be applied to gross / historical cost
balance of each layer (year).  When books are disposed of, no gain or loss would be recognized,
even if cash were received. The disposal will be recorded as a reduction of the gross library book
value and the related accumulated depreciation balance.
Additions in the current year will be grouped by a layer and the total gross asset value would be
depreciated over the established average useful life (10 years in this example).  In the initial year
of library book additions, the University will take one-half year worth as a depreciation charge. 
Assume the University purchased $20,000,000 in library books during the year.  The entry to
record depreciation on that layer only ($20,000,000/10*1/2) would be:
    Depreciation Expense -Library Books            1,000,000
        Accumulated Depreciation-Library Books        1,000,000
Artwork and Historical Treasures
Collections, works of art and historical treasures of significance that are owned by the State or
the University should be considered for capitalization.  Purchased works of art and historical
treasures, whether they are held as individual items or in a collection, should be recorded based
on historical cost.  Gifts of these types are recorded using the fair market value at the date of
donation.
To capitalize an art collection, the following conditions must be met:
1. Held for public exhibition, education, or research in furtherance of public service, rather than
financial gain
2. Protected, kept unencumbered, cared for, and preserved
3. Subject to an organizational policy that requires the proceeds from sales of collection items to
be used to acquire other items for collections.
Inexhaustible collections, works of art and historical treasures where the economic benefit or
service potential is used up so slowly that the estimated useful lives are extraordinarily long are
not depreciated.  Because of their cultural, aesthetic, or historical value, these assets are protected
and preserved in a manner greater than that for similar assets without such cultural, aesthetic, or
historical value. Capitalized collections or individual items that are exhaustible, such as exhibits
whose useful lives are diminished by display or educational or research applications, must be
depreciated over their estimated useful lives.  No depreciation shall be recorded for collections or
individual items that are inexhaustible.  All works of art and historical treasures acquired or
donated will be capitalized.
Construction in Progress (CIP)
A CIP asset reflects the cost of construction work undertaken, but not yet completed.  For
construction in progress assets, no depreciation is recorded until the asset is placed in service. 
When construction is completed, the asset should be reclassified as building, building
improvement, or land improvement and should be capitalized and depreciated.
Depreciation
Depreciation is the process of allocating the cost of tangible property over a period of time,
rather than deducting the cost as an expense in the year of acquisition.  Generally, at the end of
an asset’s life, the sum of the amounts charged for depreciation in each accounting period will
equal original cost less the salvage value.
Information Needed to Calculate Depreciation
To calculate depreciation on a fixed asset, the following five factors must be known:
 the date the asset was placed in service
 the asset’s cost or acquisition value
 the asset’s salvage value
 the asset’s estimated useful life, and
 the depreciation method.
Estimated Useful Life
Estimated useful life means the estimated number of months or years that an asset will be able to
be used for the purpose for which it was acquired.  Eligible fixed assets should be depreciated
over their estimated useful lives.  The University has established a table of useful lives that is
hard-coded into the SUNY Fixed Asset Accounting System.  When an asset is added to the
system, depending upon the sub-category of fixed assets selected, a corresponding estimated
useful life would be assigned.
Depreciation Method
The University has established the straight-line methodology for depreciating all fixed assets. 
Depreciation will begin in the month the asset is placed in service with the exception of library
books.  Under the straight-line depreciation method, the basis of the asset is written off evenly
over the useful life of the asset.  The amount of annual depreciation is determined by dividing an
asset’s cost reduced by the salvage value, if any, by its estimated life.  The total amount
depreciated can never exceed the asset’s historic cost less salvage value.  At the end of the
asset’s estimated life, the salvage value will remain.
Library books will be depreciated using the straight-line methodology based on the half-year
convention. Under the half-year convention, library books purchased during the fiscal year will
be treated as though they were placed in service on the first day of the seventh month of the
fiscal year.  One-half of a full year’s depreciation will be taken for the library books in the first
year they were placed in service.
SUNY Useful Life Schedule
The Asset Type Code is an identifier used in the SFAAS to properly classify the asset or asset
component.
Building and Building Components:
Asset Type Code Description Useful Life (in years)

0 General Construction 50

1 Site Preparation Unlimited*

2 Roof    25
3 Interior Construction 30

4 Plumbing    30

5 HVAC    30

6 Electrical    30

7 Fire Protection    25

8 Elevators    25

9 Miscellaneous    25

  Land Improvements and Infrastrucure 20

Environmental removal costs – Qualifying costs not included as a component listed above, will
be identified as a separate component and depreciated using a 30-year life.
* - Classified as Land
Capital Equipment, Furniture, Fixtures, etc.:
Asset Type Code Description Useful Life (in years)

0 M&O Equipment 13

1 Food Service 11

2 Auto/Vehicle 6

3 Furniture 15

40 Gemeral Office Equipment 7

41 Printing & Related 10

42 Electronic Data Processing 5

43 Telecomm Equipment 5

5 Audio/Visual 10

6 Phys Ed/Rec  

7 Music Instr/Equipment 15

80 Lab Equipment 13

81 Chemistry Equipment 11

82 Physics Equipment 6
83 Instrumentation 13

84 General Lab Spt 6

85 Arts & Crafts 7

9 Hosp Furniture & Equipment 8

  Library Book and Reference Materials 10

Asset Retirement
Retiring an entire asset or building component – remove the entire asset and related accumulated
depreciation from the fixed asset file.  Any undepreciated balance will be reported as a disposal
expense, net of any value received.
Accounting for Environmental Remediation:
Generally, pollution remediation outlays, including outlays for property, plant and equipment,
should be recorded as an expense.  Some projects (for example, land improvements or
remodeling), for which the primary objective is other than pollution remediation, may include
pollution remediation activities.  Except as provided below, incremental outlays attributable to
pollution remediation activities (outlays that would not be incurred absent pollution) should be
recorded as an expense.  Pollution remediation outlays should be capitalized when goods and
services are acquired if acquired for any of the following circumstances:
 To prepare property in anticipation of a sale.  In this circumstance, capitalize only amounts that
would result in the carrying amount of the property not exceeding its estimated fair value upon
completion of the remediation.
 To prepare property for use when the property was acquired with known or suspected pollution
that was expected to be remediated.  In this circumstance, capitalize only those outlays
expected to be necessary to place the asset into its intended location and condition for use.
 To perform pollution remediation that restores a pollution-caused decline in service utility that
was recognized as an asset impairment.  In this circumstance, capitalize only those outlays
expected to be necessary to place the asset into its intended location and condition for use.
 To acquire property, plant, or equipment that has a future alternative use.  In this circumstance,
outlays should be capitalized only to the extent of the estimated service utility that will exist
after pollution remediation activities uses have ceased.
For outlays under the first two criteria, capitalization is appropriate only if the outlays take place
within a reasonable period prior to the expected sale or following acquisition of the property,
respectively, or are delayed, but the delay is beyond the entity’s control.
There are no definitions relevant to this policy.
GASB 49
Note: To access the full text of GASB 49, you must have a subscription to the GASB
pronouncements.
There is no authority relevant to this policy.
There is no history relevant to this policy.
There are no appendices relevant to this policy.