Capital and Major
Projects Guidelines
Updated – Hazel Hall - 2015
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Introduction
The GAAP definition of an asset is ‘assets are economic resources. Anything tangible or
intangible that is capable of being owned or controlled to produce value and that is held
to have positive economic value is considered an asset. Simply stated, assets represent
ownership of value that can be converted into cash’
The University policy on the capitalisation of assets is that assets with a collective value
of less than £50k will remain as revenue in the I&E Statement. Any asset that has a
collective value over £50k should be capitalised and added to the asset register – as long
as the expenditure qualifies as capital expenditure.
There are two types of capital spend within the University;
1. Pre-planned expenditure on projects approved by the Place Renewal group/VCET which
generally have budgets allocated to them. You need to reference the authorisation date
on the asset registerand save copies.
2. Day to day expenditure on items that meet the capitalisation criteria. Generally the
associated depreciation cost will be met by the service that has bought the asset in
question.
Generally these are recorded as expenditure on land & buildings or equipment and each
has its own depreciation rules and monitoring protocol.
Accounting Entries
Capital expenditure should be coded directly to the balance sheet using the following
account codes:
Account Code
9101
9102
9103
9104
9105
9106
9140
9141
9142
9143
9144
9145
9146
9149
Description
Equipment Cost - Capital Software Purchase
Equipment Cost - Capital Hardware Purchase
Equipment Cost - Capital Equipment Purchase
Equipment Cost - Furniture Purchase
Equipment Cost - Consultancy
Equipment Cost - Project Implementation Fees
Land & Buildings Cost - Agency staff
Land & Buildings Cost - Consultancy Fees
Land & Buildings Cost - Fees (Other)
Land & Buildings Cost - Legal fees
Land & Buildings Cost - Security
Land & Buildings Cost - Construction costs
Building Refurbishment (Capital)
Land & Buildings Cost - Security Installations
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9150
9151
9152
9153
9154
9155
9156
9157
9158
Land & Buildings Cost - Fees - Architects
Land & Buildings Cost - Fees - CDMC
Land & Buildings Cost - Fees - Mechanical & Electrical Engineers
Land & Buildings Cost - Fees - Planning Application
Land & Buildings Cost - Fees - Project Management
Land & Buildings Cost - Fees - Quantity Surveying
Land & Buildings Cost - Fees - Structural Engineers
Land & Buildings Cost - Fees - Consultants (Other)
Land & Buildings Cost - Fees – Acoustics
PRINCIPLES INITIAL MEASUREMENT OF TANGIBLE FIXED ASSET
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A tangible fixed asset should be initially measured at its cost.
Costs that are directly attributable to bringing the asset into working
condition should be included.
Directly attributable labour costs of employees arising directly from
construction or acquisition of the asset can only be capitalised if employed
specifically for the project.
Other directly attributable costs could be, initial delivery and handling costs,
installation services, professional fees (legal, architects, engineers).
Incremental costs that would have been avoided only if the tangible fixed
asset had not been constructed or acquired. – So for example furniture in a
new capitalised lab would also be capitalised.
Salford University does not currently capitalisation any finance costs.
From an accounting perspective, only expenditure which is capital in nature
and considered to be materially significant is capitalised and recorded as an
asset. Building works would have to be significant to change an existing
building in order to increase the value.
Capital expenditures are those which provide a future economic benefit.
Examples include the purchase of plant, property or equipment; or, an
investment that improves the useful life of an existing capital asset.
To be considered materially significant, the collective value of capital
expenditure must be in excess of £50,000. Capital expenditure which has a
collective value lower than £50,000 is treated as revenue expenditure.
University budget holders, and Finance Managers, are responsible for
identifying University assets.
WHAT NOT TO CAPITALISE
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Assets or class of assets below our de-minimus level of £50k are treated as
revenue. (Class of tangible fixed assets= Assets having a similar nature,
function or use in the business of the entity)
Subsequent expenditure such as repair and maintenance should be
recognised in the P&L UNLESS they substantially change the value or the life
of the building.
Employee costs not related to the specific asset e.g. administration and other
general overhead costs.
Do not capitalise if the expenditure gives a benefit for a year or less e.g.
support/ warranty.
Marketing costs cannot be capitalised as not required to bring an asset into
working condition.
Internal relocation should not be capitalised as this does not add value.
Refurbishment should be recognised in the P&L unless it substantially
changes the value of the life of the building.
REVALUATION
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We currently revalue fully every 5 years and 3 years for interim. In 2014 we
used DTZ.
Specialised properties should be valued on the basis of depreciated
replacement cost. For example universities and research establishments
where there is no competing market demand from other organisations using
these types of property in the locality.
FRS 15 states that non-specialised properties should be values at EUV where
the MV is materially different from the EUV the reasons should be disclosed
in the notes to the accounts. Reasons to re value at MV could be that
buildings are known to being sold or demolished in the near future
Frs102
DEPRECIATION
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We use straight line depreciation.
A full years depreciation should be charged in the year of purchase or
completion. Except in the case of a new building where we only deprecate
from the month that the building is brought into existence.
 Expected usage of the asset by the entity assessed by reference to the assets
expected capacity.
 The expected physical deterioration of the asset through use/time will
depend on the repair and maintenance programme and any Economic/
technological obsolescence.
 The decision to charge deprecation centrally or to the project depends on the
rationale and agreement in the investor bid.
 If we are planning within our estates plan to dispose of buildings it may be
appropriate to accelerate deprecation.
IMPAIRMENT
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A significant decline in a fixed asset’s market value during a period.
Evidence of obsolescence or physical damage to the fixed asset
This is considered centrally in conjunction with Estates.
It is worth keeping your eye out for announcements regarding the closure or
sale of buildings and looking at strategy and the estates plan. Check the
remaining life of any buildings implicated in case there is a financial
implication and the deprecation needs to be excellerated.
CAPITAL GRANT
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HEFCE Capital teaching and research grant should be regarded as a single source
of capital funding to support investment in HEIs’ physical infrastructure. Within
this there are two elements: the Learning and Teaching Capital Investment Fund
(TCIF) and the Research Capital Investment Fund (RCIF)
TCIF- Contribute to the long-term financial sustainability of an HEI’s learning and
teaching and the supporting physical infrastructure.
RCIF-Contribute to the long-term financial sustainability of an HEI’s research and
the supporting physical infrastructure.
Income is posted to 8006 and 8007 USGR01.
If the grant supports a revenue project it remains on the code and is offset with
the expenditure using internal transfer codes 8729/3729.
If the grant is used for capital items then at year end any expenditure is moved
from 8006/8007 to 9750 and 9755.
The deferred capital grant is then released on the same life as the depreciation
charge to the I&E account using account codes 9770 9775.
If the grant received has not been utilised at quarter or year end it should be
deferred.
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It is worth noting that looking at the DCG it can be for a different amount
compared to the deprecation as the asset could have been part funded or the
asset could have been revalued but the amount of the grant would not have
changed.
We also have grants to fund capital expenditure from different sources such as
NHS or research grants. The DCG for these are posted on 9780 and 9785.
As well as capital expenditure there may be elements of revenue expenditure associated
with major projects in the University. This expenditure is also recorded and monitored to
give a true University view on what it is spending on its schemes.
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