Overview: Buying and Accounting for Capital Equipment
On this page:
- Definition and Types of Capital Equipment
- Key Roles and Responsibilities
- Acquiring and Disposing of Capital Equipment
- Accounting for Capital Equipment
Definitions and Types of Capital Equipment
Capital equipment is also referred to as property or capital assets.
At Stanford, a capital asset, or piece of capital equipment or property, is defined as having all of the following characteristics:
- An acquisition cost of $5,000 or more
- A useful life of more than one year
- Is a stand-alone, moveable item
When large quantities of equipment are acquired, the equipment is also considered a capital asset. The “bulk” purchasing process must be used when all the following criteria exist:
- The equipment will be Stanford-owned at time of purchase and is not being charged to a sponsored project
- a quantity of 25 or more identical items are being purchased
- the individual cost for each item is $400 or more
- the total cost of the purchase is $10,000 or greater
Fabrications are created by assembling a number of components (manufactured or custom made) to produce a specialized piece of equipment that meets unique research specifications.
An equipment fabrication must meet all of the following criteria:
- Be a unique, one of a kind item, fabricated by Stanford
- The aggregate cost of materials, supplies, and components must be $5,000 or greater and is included as part of the acquisition cost for the completed asset
- The cost of associated labor is included as part of the acquisition cost reported for the completed asset
- Upon completion, have a useful life of more than one (1) year or, if on a NASA contract, two (2) years
Most fabrications are sponsor-funded and therefore have a number of compliance requirements that require special accounting treatment. For additional details, contact your Property Service Representative within the Property Management Office.
See Capital / Non-Capital Project Decision Tree to understand criteria for capitalization.
Key Roles and Responsibilities
Property Management Office (PMO) within the Office of Research Administration develops and implements policies and procedures within a system that enables effective property management for the University. PMO's responsibilities also include financial reconciliation, sponsor property reporting, training, conducting the physical inventory, and maintaining the official property records.
Department Property Administrators (DPAs) establish and maintain property records for their assigned areas. The DPAs provide guidance to department personnel concerning property matters such as acquisition, coordination of transfers, equipment custody, and equipment at sub recipient locations, maintenance, physical inventory, and disposal. DPAs are their schools' liaison with PMO on property related issues. To identify your local DPA, use the DPA Lookup Tool.
Asset Custodians are Stanford employees responsible for a designated group of assets. Asset Users are the individuals who use the equipment on a regular basis. A custodian may also be an asset user. Asset custodians and asset users are responsible for providing accurate, timely, and complete information to their DPAs regarding property status and use, and must maintain assets in a responsible manner, including taking precautions to discourage loss, damage and theft of the assets.
PMO's Property Manual further discusses these and other roles and responsibilities.
Acquiring and Disposing of Capital Equipment
Acquiring Capital Equipment
Purchasing is the most common method of acquiring property at Stanford University. Requisitions for property are placed online, using the iProcurement application within Oracle Financials. Requesters may create a Standard Purchase Requisition or order from SmartMart (See How To: Create a Standard Non-Catalog Requisition), which includes requesting purchase of capital equipment.)
SmartMart Capital Equipment Orders:
- SmartMart Capital Equipment orders are placed immediately with the supplier after the Department Property Administrator and financial approvals. Invoices are electronically transferred by the supplier to the Accounts Payable department. SmartMart orders do not go to Purchasing & Contracts and do not require backup documentation.
Standard Capital Equipment Orders:
- Standard Capital Equipment requisitions are created and routed by the requester for approval, orders are placed by a buyer in Purchasing & Contracts, and receiving of the property is recorded in iProcurement by designated departmental personnel.
- Changes to a Standard Capital Equipment Purchase Order should be made using the non-catalog Standard Capital Equipment category (not the Standard Change Order category). The requester must note the original PO number in the item description for the change to be processed.
DPA approval for Capital Equipment Orders:
- Capital equipment purchase requisitions (either via SmartMart or Standard requisition) require DPA approval. For Standard requisitions, the requestor must use the Standard Capital Equipment category available in the Non-Catalog Request section in iProcurement. The DPA should be listed as the first approver in the routing list to avoid unnecessary delays.
PCard use is not allowed on capital equipment purchases.
All capital equipment purchases made by Stanford are subject to pre-purchase screening by DPAs, as required by federal regulation. This is necessary to avoid acquiring duplicative items and to check for availability within federal agencies. In addition, if sponsored funds are used to purchase property, there may be other pre-purchase considerations, such as title (ownership), taxability and approval to purchase. Specific requirements are identified in within each sponsored project agreement. The Acquisitions chapter of the Property Manual explains additional information about screening.
Recording Capital Equipment
A PTAE (Project, Task, Award and Expenditure Type) is selected when the capital equipment is initially purchased. Common expenditure types for capital equipment can be found at the DoResearch web site.
Other Methods of Acquiring Capital Equipment
Other methods of acquiring capital equipment include donations, incoming transfers, loans, capital leases, and sponsor-furnished property. Chapter 2 Acquisition of the Property Manual explains the other methods of acquiring capital equipment.
Disposing of Capital Equipment
Equipment no longer needed by its owning department is a candidate for re-use within Stanford University. Re-use within Stanford is the top priority before an asset is processed for disposal. Resources related to disposal of equipment (both capital and non-capital) at Stanford University and reuse of equipment are available at the Property Management web site – Chapter 4 Excess.
Accounting for Capital Equipment
The following systems, working in conjunction with each other, make up the “official” property record:
- Sunflower Assets (SFA): Used by DPAs and PMO to create and maintain asset records for the accountability, tracking, physical inventory and disposal of property
- Grants Accounting (GA): Used by DPAs and PMO to track fabrications while they are still work in process
- Oracle Fixed Assets (OFA): Used by Controller's Office staff to calculate and track Equipment Depreciation and University Accounting
- PMO Material Tracking System: Used by DPAs and PMO to create and maintain records for the accountability, tracking, physical inventory and disposal of government owned material
All capital and sponsor-owned property (except material which is tracked in the PMO Material Tracking System) must be recorded and tracked in SFA. The entry of the receiving transaction in the iProcurement system initiates a flow of data into the Sunflower Assets PO Interface from which the Department Property Administrator (DPA) can subsequently create an asset record.
Departments are also encouraged to use SFA as a single repository for all other property they manage, such as sensitive property, and other non-capital items the department chooses to track. Having a single record facilitates reporting, eliminates redundant and duplicate record entry into unofficial shadow systems, and enables the tracking of purchase trends within a department. It can also help maximize reutilization to avoid unnecessary purchases, and be used as a tool for replacement planning.
Reclassifying or Transferring Capital Equipment Expenditures
Sometimes the P,T,A, and/or E initially selected may be incorrect or may need to be changed. Per Administrative Guide Policy 3.2.2, reallocation of charges must be accompanied by documentation justifying the change, and such documentation must be received from an authorized financial administrator for the account(s) (PTA) being debited. For capital expenditures, this transfer is done in the core Oracle Financial application by Controller's Office staff. See specific instructions and template for requesting transfers and PTAE Change.
Capital Expenditures on Expenditure and Fund Reports
The treatment of capital assets in the University's expenditure and fund reports is explained in the job aid at https://stanford.box.com/fingate-cap-exp-on-expfund-rep.
Additional information on procedures and policies related to capital equipment can be found at the DoResearch web site.