Printed on: 02/22/2020. Please go to http://policy.umn.edu for the most current version of the Policy or related document.
Capital Equipment Acquisition: Internal Sales Capital Equipment Purchases
Capital Equipment Asset Transactions:
- Capital equipment asset transactions must be recorded in Internal Sales Capital Purchase - Fund 7201 using Account 850101.
- Federal requirements mandate that capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges. Internal Sales units must not charge equipment, buildings, or land purchases to Fund 1150 or 1151.
- A separate internal sales accounting structure should be used for each unique internal sales activity. The Internal Sales Capital Purchase Fund 7201 should use the same DeptID and chartfield codes that uniquely identify the internal sales activity in the internal sales operating Fund (1150 or 1151).
- The Internal Sales Capital Purchase fund will go into deficit and the value of the equipment will be recovered over its useful life.
- The cost of the capital purchase will be recovered over the useful life of the equipment through allowable depreciation included in the rates.
- IMPORTANT: All capital equipment will be depreciated on a monthly basis to a central chartstring. Units should use the Asset Management reports found on UMReports in order to determine their monthly depreciation amounts.
- Depreciation is manually transferred from the unit's internal sales operating activity (Fund 1150 or 1151) or the unit's external sales operating activity (Fund 1026) into the Internal Sales Capital Purchase Fund 7201 using transfer Accounts 600310/610310 – ISO Depreciation Expense at least on an annual basis. At the end of the useful life, the equipment net book value should equal zero.
- Depreciation expenses will be calculated in the Asset Management module and charged to a central DeptID and Program value.
- The unit must use the same DeptID where the asset was purchased when recording the depreciation expense transfer.
- Units may choose to subsidize the depreciation of the equipment in the Operating Fund 1150 or 1151
- The annual depreciation costs included in the internal sales billing rates should equal the amount being transferred to the Internal Sales Capital Purchase Fund from the Internal Sales Operating Fund
- Note: If equipment is funded from a federal source (i.e. Federal agency grant/contract, agricultural appropriation, federal pass-through to granter/contractor), depreciation cannot be recovered in rates charged to other university departments.
Capital Equipment Disposals:
- Capital equipment asset sale proceeds due to disposal of the capital equipment asset should be recorded in the Internal Sales Operating Fund (1150 or 1151). Contact the Internal/External Sales Office for appropriate accounting treatment.