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8.0 - Capitalization of Moveable Equipment


Capitalization of Moveable Equipment


Capital Asset Management



November 2003



January 2020




To provide guidelines for the use of capital equipment object codes on procurement transactions and other financial documents. Procurement transactions that use a capital object code are a primary source used to create capital assets in the university asset database. For this reason, it is critical that organizations correctly capitalize equipment to ensure assets are correctly recorded in the university asset database.


Capitalization of Moveable Equipment
Object Codes

Capitalization of Moveable Equipment

Equipment must meet two specific criteria in order to qualify as a capital purchase.  It must have (1) an acquisition value of at least $5,000 (referred to as Capitalization Threshold) and (2) a useful life expectancy of one year or greater.  The term “equipment” includes delivery equipment, office equipment, machinery, furnishings, factory equipment, and similar fixed assets.   Generally equipment that is attached to a building will be capitalized as moveable equipment when removing the equipment does not cause structural damage to the building and will not destroy the equipment.

Costs that can be capitalized with equipment purchases include:
•    Cost of assembling the asset
•    Cost of installation
•    Freight/shipping
•    In-transit Insurance
•    Preparing the site and asset for its intended use

•    Software included with the hardware if it is purchased; not licensed

•    Training

The following are not considered capital equipment regardless of cost or useful life:

  • Repair or replacement parts.  (Use object code 4700- Repair & Maintenance) 
  • Maintenance and Warranty agreements (Use object code 4776 - Service Maintenance Contracts.)
  • Software license agreements are not capitalized unless ownership is indicated within the license agreement and the acquisition cost is $500,000 or more. Software license agreements not indicating ownership or having a value of less than $500,000 should be expensed to 4616-Computer Software Purchases.  (See CSOP 39.0 Computer Software)

When additional equipment is received on a purchase order at no cost, these items should be added to the purchase order with a zero cost. For example, the university is given a "buy one get one free" offer. The cost of these items would then be distributed equally among the number of items purchased. Please contact  for guidance since capitalization of the items will depend upon the situation and the total cost.

The acquisition cost of an asset is decreased by any full order discount on the purchase order.  A trade-in allowance reduces the acquisition value of the asset as well.  (See CSOP 11.0 Trade-In of Similar Capital Equipment.)

Spare Equipment  

Sometimes equipment is purchased with the intent to be used as a spare, or backup, in case of a failure of an in-service asset.  Spare equipment is an asset that can be used independently (i.e. router or server purchased with the intention of being a spare).  Spare equipment should be capitalized if over the capitalization threshold.  The asset status code for spares should be “S” for storage until such time the equipment is used.   


Spare or Replacement Parts  

Spare or replacement parts are not capitalized.  To meet the definition of a spare or replacement part, the part must not be able to be used independently.  For example, a replacement line card purchased for an existing router would be considered a replacement part and should be expensed.

System Assets  

In some instances, purchases of components can be capitalized together as one asset under moveable equipment, referred to hereafter as system assets.  System assets are defined as components that work together to perform one function.  Each component is necessary for the system to function as a whole.  Removal of any one component would result in the system not operating at the required capacity or for its intended purpose. This includes software that is internal to the asset and is necessary for the asset to function for its intended purpose.

Systems should meet the following two conditions:

  1. Physical attachment- the components are connected in a manner of dependency greater than a cable or wired connection. The term “piggy-back” may be applicable to describe the situation.  Ultimately, if the only means of attachment is a cable, we recommend the components be created as individual assets.
  2. Lack of Interchangeability-the components cannot be disconnected from the system asset and used in a similar manner with another system.  

The physical inventory should be a consideration when combining components to create system assets.  For components over the capitalization threshold, Capital Asset Management recommends these items be created as individual assets.  We feel this is more efficient and effective for physical inventory inspection.

Organizations may be required to submit a System Attestation Form to identify components as system assets especially for those system assets purchased on multiple purchase orders.  The form will require the organization to attest by signature that the items will work together to perform one function and that each item is necessary for the system to function as a whole.


Upgrades can be capitalized and largely fall into two categories:

  1. The upgrade is for an existing asset purchased in the current fiscal year.  Upgrades to current year assets do not have to be over $5,000. 
  2. The upgrade is for an existing asset purchased in a prior fiscal year, AND the cost of the upgrade is 5,000 or more.   Contact the Capital Asset office to inquire if this type of upgrade is eligible to be capitalized with an existing asset created in a prior fiscal year.

An upgrade must meet one of the following criteria:

  • A substantial increase in the functionality of the equipment which allows it to function or perform tasks it was previously incapable of performing.
  • A substantial increase in the efficiency of the equipment, that is, an increase in the level of service provided by the equipment without the ability to perform additional tasks.
  • An extension of the estimated useful life of the equipment.

Modular Furniture  

Modular Furniture is normally purchased in individual pieces on separate line items and then configured to make furniture.  The normal practice will be to capitalize only those individual pieces that meet the capitalization threshold.  

An exception can be made for organizations that want to capitalize modular furniture where the individual components are under the $5,000 threshold.  The individual components must create a furniture configuration (system) for a given room location, and in total meet at least the capitalization threshold.  If the organization wants to capitalize modular furniture, each line item must be assigned a capital object code.  The organization must also indicate how many system assets (furniture) they expect to be created, and the location of each.  This information can be communicated to the Capital Asset Management Office using the Capital Asset Tab on the requisition. If no details are provided, a General Error Correction will be processed to move the payments to a supplies and expense object code.

The organization will be responsible for regular inventory of the modular furniture assets.  If the modular furniture asset is at some point reconfigured, or the components are physically taken to Surplus, please contact Campus Capital Asset Office personnel to determine the correct asset maintenance action.  If the purchase order has been archived and is not accessible or the organization is unable to determine the line item cost of the components, the organization may provide the Campus Capital Asset Office with a percentage of the cost to separate and retire.  The modular furniture asset will remain as an active asset as long as the remaining cost meets the capitalization threshold.

Any furniture items that are not modular and do not meet the capitalization threshold will be expensed as supplies and expense.  For example, a conference table with a cost of $4,000.00 would not be capitalized.  

Mass purchases of furniture are not capitalized.  For example, on a purchase of 100 beds with a unit cost of $700.00, the $7,000 total cost will be expensed.  

Object Codes

University Funded Object Code
A university funded object code should be used for assets purchased and owned by the university.

7000    Capital Equipment

Federally Owned Object Code
A federally owned object code should be used when the granting agency holds title to the asset.  This can be determined by a review of the Award Summary report sent to the organization.   The Award Summary report is created upon setting up the award and is normally sent to the fiscal officer, or delegate, and the PI.

7031    Capital Equipment – Federally Owned

On the Details & Dates panel, there is a subpanel called “Sponsor” which shows the sponsor ID and name, as well as the pass-thru or “ Prime Sponsor”.  The presence of a CFDA number is also an indicator of a federal project.

Ownership information may also be obtained from the KC Award in Kuali Coeus (KC) Grants.  The award number can be found in KFS in the awards tab of the account lookup.   Use this number to find the Award in Kuali Coeus (KC) Grants.  After opening the award go to the “Comments Notes, and Attachments” tab.  If the grant or agency holds title, it should be noted here.  If no information is available, please contact the Office of Research Administration.   

Other Owned Object Code
Other Owned should be used when the title to the equipment is not vested with IU.  An example would be a purchase funded by the State of Indiana, with the equipment returned to the State agency once the project has closed. To determine if an Other Owned object code should be used, follow the same steps in the Federally Owned object code above.

7032    Capital Equipment –Other Owned
The Office of Research Administration will assign a federally owned or other owned object code when appropriate.


Capital Equipment- must have an acquisition value of at least $5,000 and a useful life expectancy of one year or more.

Equipment- The term “equipment” includes delivery equipment, office equipment, machinery, furniture and fixtures, factory equipment and similar fixed assets.

Systems - are defined as components that work together to perform one function.  These components must be necessary for the system to function as a whole.  Removal of any one component would result in the system not operating at the required capacity or for the intended purpose. 







Organizations that purchase and maintain capital equipment.