Equipment

Definition

For service and recharge centers, equipment is considered depreciable if:

  • The useful life is longer than 1 year, and
  • It is used in service center activities, and
  • The cost is equal to or greater than $5,000 per individual equipment tag number. Cost includes calibration, installation, freight, trade-in, and sales & excise tax.

Recent Changes Align the University and Service & Recharge Center Equipment Thresholds

Effective July 1st, 2016, the University has changed their equipment threshold and it is now in alignment with the Service & Recharge Center equipment threshold.  Service and recharge centers can purchase equipment costing less than $5,000 on their operating budget. Centers can depreciate only equipment costing $5,000 or more.

Acquiring Equipment

The acquisition cost of equipment is determined using the University's equipment policy as described in Administrative Policy Statement 38.5.

There are several ways depreciable equipment used for service center activities can be acquired:

  • Depreciable equipment is typically purchased from the equipment reserve budgets of the service or recharge center.
  • Depreciable equipment acquired with federal grant funds may be turned over to the service or recharge center after the equipment has served the purposes of the grant, provided title is given to the University. See restrictions on recovering cost of federally funded equipment for more information.
  • Depreciable equipment may be leased. The terms of the lease will determine whether it is a capital lease or an operating lease. Refer to the lease page for more information.
  • Depreciable equipment may be donated to the University and used by the service or recharge center.
  • Designated university-wide service centers may request central University funds to acquire depreciable equipment.
  • Depreciable equipment for service centers may be purchased by a department using non-federal funds. The department can recover the cost of the purchased equipment by receiving services without charge or charging departmental equipment to the service center equipment reserve account up to the cost of equipment, with prior MAA approval.

* Depreciable equipment MAY NOT be purchased on the operating account.

Restrictions on Recovering Cost of Federally Funded Equipment

The portion of equipment funded by federal grants & contracts cannot be recovered in the rates to federal users. Federally-funded equipment can be used in service center operations if the University has title to the equipment and the grant that paid for the equipment has expired. If the center has federally-funded equipment it would like to include in rates to non-federal or non-UW users, please contact MAA.

Recovering Equipment Cost

Equipment costing $5,000 or more per item and purchased on non-federal budgets cannot be included in full in the rates in the year of purchase. The cost is recovered by including depreciation in the rates over a period of time.

Depreciation = (Acquisition Cost - Residual Value) / Useful Life

For a definition of the terms used in the calculation of each method of recovering the equipment cost, see glossary.

Note: Interest costs on capital leases cannot be included in rates to federal users and depreciated. The center should not include interest cost in the acquisition of equipment.

Including depreciation of an individual piece of equipment is optional. 

Asset Cost Recovery

  • Per Uniform Guidance § 200.436
    • Depreciation is the method for allocating the cost of fixed assets to periods benefitting from asset use
      • Calculation based on depreciation estimate in Rate Proposal vs. Workday
    • MAA recommends the Unit Asset Coordinator run the Find Assets - Unit Asset Coord. R1185.1 report to view assets by Cost Center
  • Asset Cost Recovery Defined
    • The transfer of revenue equivalent to the projected used equipment deprecation captured in the Recharge Rate Proposal from RS100073 Operations to RS100076 Equipment Reserve. 
    • Only possible when the Center has the ending balance to complete the Fund Transfer Journal.
    • Should take place at least quarterly.
  • Asset Cost Recovery Process
    • Depreciation tab on Recharge Rate Proposal Template
      • “Depreciation in Proposal”- subtotal of estimated depreciation expense included in annual Rate
      • Quarterly or monthly calculation
    • Run Actuals Summary with Statistics Accounts R1300
      • Company: UW1861, 
      • Period: FY20XX – (month), 
      • Time Period: Prior Period YTD, 
      • Worktags: (Recharge CC) & RS100073, 
      • Book: Common Book
    • Review Ending Balance
    • If applicable, prepare Funding Transfer Journal to move appropriate amount of Asset Cost Recovery to RS100076 Equip Reserve Resource
  • Asset Cost Recovery Example
    • Total annual estimated depreciation expense claimed on Recharge Rate Proposal 
      • =$100,000/4 = $25,000 for quarterly journal
    • Ending balance for corresponding period on Actuals Summary R1300
      • =$93,802 > $25,000
    • Ending balance allows Funding Transfer Journal
      • Move Asset Cost Recovery from RS100073 Center Operations to RS100076 Equipment Reserve

Schedules

If depreciation is included in the rates, the center needs to include a schedule which details the following information for each piece of equipment included in the rates.

  • Type of equipment
  • Workday tag number
  • Total cost of equipment
  • Budget numbers funding equipment cost
  • Cost that is being depreciated
  • Useful life
  • Annual depreciation
  • Date depreciation begins
  • Date depreciation end

MAA reviews & approves the schedule when it is submitted. An updated depreciation schedule can be submitted at any time during the year. Since equipment must be listed on the schedule to include depreciation in the rates, most centers update their schedule with their annual rate proposal.

Equipment Depreciation Expense Flow

The process of moving monthly asset depreciation expense occurs with a combination of operational (automatic), and manual journals within Workday. Please see Service and Recharge Asset Depreciation Expense Flow for more information. 

Equipment Disposal

Record the proceeds (if any) from the sale of the equipment in the equipment reserve Resource. There is no impact upon the operating budget.

Any gain or loss on the sale of equipment should be recognized in the Center Operations Resource RS100073. Please see Service and Recharge Asset Depreciation Expense Flow chart for details on the process.

Remove equipment from the depreciation schedule and stop including depreciation in the rates once the equipment is no longer used by the center.