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Threshold Change - Financial Accounting

What determines the treatment of an equipment item during the transition in FY 2015-16: the date of the purchase order; the date of receipt; or the date of payment?

For Non-Sponsored and State Budgets

The purchase order date will determine which threshold will apply. The $2,000 threshold will apply in cases where a purchase order has been fully executed (EI or BPO number issued) prior to July 1, 2016, with the equipment object code “06” regardless of when the equipment is paid for and/or received.  We will continue to depreciate these items until they are fully depreciated or disposed of (asset retirement), then remove them from the inventory system.

Purchase orders executed on or after July 1, 2016 will be subject to the new $5,000 threshold.

Which object code should be applied for equipment purchases ($2,000 - $4,999) for state and non-sponsored budgets?

Beginning 7/1/2016, object codes “05-40 non-capitalized equipment (less than $5,000)” and “05-41 non-capitalized equipment - M&E tax exempt ($200 - $4,999)” will replace the existing “06” object codes for specific equipment purchases with a cost of $2,000 - $4,999.  (See the non-sponsored budgets and non-grandfathered award object code chart below)  

Which object code should be applied for equipment purchases ($2,000 - $4,999) for grandfathered award budgets?

Beginning 7/1/2016, two new object codes “05-47 non-capitalized equipment ($2,000 - $4,999) – grandfathered awards” and “05-48 non-capitalized equipment M&E tax exempt ($2,000 - $4,999) – grandfathered awards” will be available for equipment purchases of $2,000 - $4,999 for grandfathered award budgets.  These new object codes will replace the existing “06” object codes for specific equipment purchases with a cost of $2,000 - $4,999.  (See the grandfathered award object code chart below)  

What if I submit my requisition on June 20th, 2016, which threshold would apply?

For non-sponsored budgets, the requisition must be fully executed  (BPO or EI number assigned) before June 30, 2016 for the $2,000 threshold to apply.  All fully executed purchase orders  (BPO or EI number assigned) after July 1, 2016 would use the new $5,000 threshold. 

Will the items acquired before July 1, 2016, with unit acquisition values below $5,000 be removed from the inventory?

Effective 7/1/2016 the UW will no longer be required to inventory items with a previously acquired value under $5,000 that are still depreciating.

UW Financial Reporting has consulted with the University’s auditor (KPMG) and has determined that the impact to the financial statements will be material if records with previously acquired values under $5,000 are removed from the inventory system and written-off from the financial records.  We will continue to depreciate these items over the next 5 years (FY17 – FY21) until they are fully depreciated or disposed of (asset retirement), then remove these items from the fixed asset system. In FY22, the remaining items under $5,000 will be written-off and removed from the fixed asset system.

The exception to this will be equipment deemed as sensitive items in the 10XX class code series (weapons, firearms, signal guns and accessories).  These items are considered at risk or vulnerable to loss and will remain in the inventory system (regardless of the acquisition cost) and physically verified periodically. 

What financial accounting changes will occur beginning in FY 2016-17?

Equipment purchases from $2000 to $4,999 will now be included as operating expenses rather than depreciable assets.

Will this change affect the construction of new buildings?

This change will not affect the University’s capital construction threshold, but may affect the overall construction project budget.  After the change, equipment purchases between $2,000 and $4,999 that were previously budgeted as capital purchases, will become operating expenditures.