Equipment and depreciation - Enterprise Financial System

University of Minnesota
Internal/External Sales
“Equipment Purchases and
Plant Funds, Transfers and other
Rate Development - Depreciation
• Depreciation associated with capital equipment may be included
in the rate development.
• Depreciation expense will be calculated in the Asset
Management module.
• Separate capital equipment chartfield strings should be
established to account for capital related transactions.
Learning Objectives
As a result of this session, participants will be able to:
• Set-up the account structure to record the purchase of a capital
asset and record depreciation
• Include equipment expense (depreciation) in the rate
development, budget and record actuals
• Validate depreciation with Inventory Services vs. rate
Development and Budget.
Websites for more information
What is a Capital Asset
Key Terms and definitions
Using an ISO Plant Fund
Transferring Depreciation to the ISO Plant Fund
Questions & Answers
Internal Sales Rate Development
Procedure and Website
Located at :
Internal Sales EFS website:
Administrative Procedure Establishing Internal Sales Capital
Equipment Funds and Recording Depreciation:
Internal Sales Training Module:
Inventory Services Website
Located at :
Inventory Services Website:
Instructions for Transferring Capital Equipment Assets
Transferring or Selling Capital Equipment Assets to Another
University Department:
Inventory Services Website
Located at :
Transferring or Selling Capital Equipment Assets to Another
University Department:
Asset Accounting, Asset Management, Asset Transfer Form –
Financial Management Training Courses
What is a Capital Asset
Capital assets are items that are used in the operations but are
not intended to be sold as part of such operations.
Capital assets must have:
• Acquisition value of $2,500 or greater per item
• A useful life greater than the capitalization threshold for the
asset category to which they belong.
• Capital equipment assets are tangible non-expendable personal
property items.
•A capital equipment asset must maintain its identity over the
course of its useful life.
What is a Non-Capital Asset
Non-capital equipment assets are:
• non-expendable personal property items with an acquisition
value of less than $2,500 per item
• an estimated useful life of less than one year.
Non-capital equipment assets are expensed.
Custodial organizations (DeptIDs) are responsible for all of the
capital and non-capital equipment assets in their custody.
Key Terms Associated with Assets
• Acquisition cost - Includes the invoice price and the cost of any
modifications, construction, installation, insurance, freight and is
reduced by any trade-in. For donated assets the value is the fair
market value or appraised value at the date of the gift.
• Depreciation - The allocation of the cost of an asset over its
economic life.
Key Terms Associated with Assets
• Useful Life - The length of time that a depreciable asset is
expected to be useable as defined by the Controller's Office
following Generally Accepted Accounting Principals.
• Inventory - An asset that a University department holds for sale or
use in providing goods and/or services to customers.
• Capital equipment assets are not "inventory."
Internal Sales Depreciation Process
• Internal Sales Organizations can recover the cost of capital
equipment in the rates they charge other University departments
by including the appropriate depreciation in the rate development.
• Only include amounts for purchases already incurred.
• Not allowed to include amounts in their rates for anticipated
future purchases.
• Federal grants can’t include depreciation on equipment purchased
with federal funds.
Internal Sales Depreciation Process
• Capital equipment must be transferred to the Internal Sales Plant
Fund specifically designated for this purpose, and costs are
recovered by including the applicable depreciation amount in
service rates.
• Plant Fund Code for ISO activity is 7201- Internal Sale Capital
• The equipment acquisition and/or original purchase cost would be
recorded in account 168001- Equipment Acquisitions.
• This amount would show up as a negative value on the UMReport
“Account Budget Status for Current Non-Sponsored Funds”.
Internal Sales Depreciation Process
• This depreciation is then transferred from the Internal Sales
operating fund into the plant fund account on a monthly, quarter,
or annual basis.
• Transfer codes to use for recording equipment depreciation are
the 600301 - Non-Mandatory Transfer In - Equipment Replace
and 610301- Non-Mandatory Transfer Out - Equipment Replace .
• The amount transferred from the operating account (610301)
value will be a negative amount and the amount received in the
plant fund account (600301) will be a positive amount.
• The result of the transfer will reduce (replenish over time) the
negative value (deficit) of the equipment in the ISO plant fund to
$0 after the useful life is complete.
Internal Sales Depreciation Process Example
Purchase $100,000 capital asset in plant fund 7201 – ISO Capital
Purchases and transfer 12 months of depreciation (1,666.67 per
• 168001- Equipment Acquisitions Budget:
• 168001- Equipment Acquisitions Expenditure: -100,000.00
• 760101 - Equipment Depreciation Budget/Exp:
• 760101 - Equipment Depreciation Budget/Exp:
Transfer In
600301 NMTI - Equip Replace Budget:
600301 NMTI - Equip Replace Expenditure: 20,000.00
Internal Sales Depreciation Process Example
Transfer 12 months of depreciation (1,666.67 per month) from
operating fund 1150 – Recharged Internal Sale :
Transfer Out
610300 Non-Mand Oth Trsfr Out-FinBdg Budget: -20,000.00
610301 NMTO - Equip Replace
Expenditures: -20,000.00
Internal Sales Depreciation Process
• Policy and procedures for ISO capital purchases are not
• Capital Assets should not be depreciated in the ISO operating
fund using account 760101 – Depreciation – Equipment.
• Internal Sales equipment must be identified separately from nonInternal Sales equipment in the University's property accounting
Inventory Services
• Inventory Services is responsible for updating the accounting
system for all capital equipment.
• Inventory Services will assist departments to determine
depreciable life of capital equipment and appropriate method for
disposal of capital equipment.
• Units are responsible for the accuracy of the recording of the
purchase and depreciation for Internal Sales capital equipment.
• Inventory Service’s records are official and units will be audited
against what they have recorded.
Inventory Services
Inventory Services will assist in the identification of capital
Inventory Services will identify equipment that is purchased with
federal funds so that the department can appropriately account for
all equipment related to their internal sales activities.
Include depreciation in the rate development
Capitalize capital assets
Expense –Non-capitalized assets
Only include purchased or donated assets
Use ISO Plant Fund
Transfer depreciation from operating fund to plant fund to record
expense and replenish equipment purchase value
• Use Inventory Services to support activity
Questions & Answers
Questions & Answers