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Capitalization Policy

 

West Virginia University Policy
Division of Administration and Finance

Policy Number: IARA-01


CAPITALIZATION POLICY


Reason For This Procedure:
  • To establish a uniform capitalization procedure for equipment and fixed assets that complies with federal, state, and West Virginia University (WVU) reporting requirements.

To Whom Does This Procedure Apply:  

  • This Procedure applies to all West Virginia University departments, including those on the regional campuses - Potomac State College of WVU, WVU Institute of Technology, Charleston division of the Robert C. Byrd Health Sciences Center, Jackson’s Mill State 4-H Conference Center and Camp, and the WVU Farms - and the West Virginia University Research Corporation.
 

Definitions



Buildings

Includes buildings purchased or constructed. Construction projects are initially capitalized to construction in progress. Subsequently, the capitalized expenditures are recorded as an asset.

 

 

Building Improvements

 

The substitution of a better asset for the one currently used (example - install carpeting where none existed or substitute a concrete floor for a wood floor), or any change to the building which increases its future service potential and extends its useful life (example - substitute a new wooden floor for an old deteriorated wooden floor).    

 

Computer Software

Includes computer software acquired for internal use. Generally, only institutionally significant systems with a cost of $100,000 or greater are capitalized. Also includes major modifications (such as an upgrade) to the software.

 

 

Other Intangible Assets

An intangible asset is an asset that 1) lacks physical substance, 2) is nonfinancial in nature and 3) has an initial useful life of one year or more.  This includes right-of-way and other types of easements, water rights, timber rights, patents, copyrights, trademarks, licenses and permits with a cost of $25,000 or more.  This also includes gifts of software with rights to use.  This does not include assets acquired primarily for the purpose of directly obtaining income or profit. 

 

 

Donated Assets

Assets received in a voluntary non-reciprocal transfer from another entity such as gifts of capital assets.

 


 

Equipment

An article of non-expendable, tangible personal property that is free standing, movable, is complete in itself, does not lose its identity when affixed to or installed in other property and has a useful life greater than one year. Includes delivery equipment, office equipment, machinery, furniture and fixtures, factory equipment, instruments and vehicles. Also includes the following –

 

a)      Fabricated Equipment
Fabricated equipment includes self-constructed equipment where the total unit cost incurred to fabricate the equipment is $5,000 or more. Components include enhancement parts that materially and permanently increase the value or useful life of equipment. A system with multiple components which cannot operate independently of each other and together cost $5,000 or more will also be capitalized. The rule-of-thumb is that for a component to be included in the original acquisition cost of a piece of equipment, it should be an attached or installed option which, as assembled, is expected to operate as one unit for the remainder of its life.

 

b) Exceptions to Equipment
Exceptions to the equipment definition are –

Exceptions to the equipment definition are –

·          Assets purchased as repair parts for existing parts in previously tagged equipment.

·          Materials used in repair or replacement in previously tagged equipment.

·          Household equipment (drapes, bedding, carpet replacement).

·          Built-in equipment – such items become part of the building or structure after installation and may be capitalized as building improvements. For example – built-in cabinets, garbage disposals, furnaces, and air conditioners. Please see the definition of Building Improvements.

·          Livestock – is neither tagged nor capitalized.

 

Federally Owned Assets

Includes assets purchased with federally sponsored award funds. These federally funded assets are tagged, recorded and tracked in WVU’s Fixed Assets System but are not reported on the Financial Statements of the University. The title to such assets generally remains with the federal sponsor. However, in some situations the federal sponsor may transfer the title of the asset to WVU.

 

 

Other Party Owned Assets

Includes assets purchased with sponsored award funds (other than federal funds) or assets furnished by the sponsor (non-federal). These sponsor funded or sponsor furnished assets are tagged, recorded and tracked in WVU’s Fixed Assets System but are not reported on the Financial Statements of the University. The title to such assets generally remains with the sponsor. However, in some situations the sponsor may transfer the title of the asset to WVU.

 

 

Federally Furnished Assets

Includes assets directly acquired by and in the possession of the government and subsequently furnished by the government to the University as part of a sponsored award. These federally furnished assets are tagged, recorded and tracked in WVU’s Fixed Assets System but are not reported on the Financial Statements of the University. The title to such assets remains with the federal sponsor and the assets are returned to the government at the end of the contract or sponsored award through which it is provided.

 

 

Infrastructure

Long-lived capital assets that are part of a network of assets that can have service potential for an extended period and that are normally stationary. Example of infrastructure networks – roads, sidewalks, electrical, sewer and water systems, fiber optic cabling system, transit systems, bridges, dams and tunnels.

 

 

Land

Land purchased by WVU or acquired by gift or bequest.

 

 

Land Improvements

Any improvements with a limited life made to ready land for its intended use that is not part of an infrastructure network. Examples of land improvements -  parking lots, landscaping, benches, fountains, bleachers, retaining walls, septic systems.

 

 

Leased Assets

Assets that are purchased under lease purchase contracts or agreements. Leased assets are capitalized if the non-cancelable lease agreement meets any one of the following requirements (as prescribed by GASB Statement No. 62) –

I. The lease transfers ownership of the property to the lessee (WVU) by the end of the lease term.
II. The lease contains a bargain purchase option, i.e., allows the lessee (WVU) to purchase the asset for a price that is substantially lower than the expected fair value of the asset at the date the option becomes exercisable.
III. The lease term is equal to 75 percent or more of the estimated economic life of the leased property.
IV. The present value of the minimum lease payments at the inception of the lease equals at least 90 percent of the fair value of the leased property.

Lease agreements not meeting any one of the above criteria are considered operating leases and not capitalized. The period payments are recorded as an expense.

 

Leasehold Improvements

Improvements to land and building leased by the University. These may include walls and partitions, electrical wiring and fixtures, heating and cooling systems, roofing and plumbing. Repair, maintenance and painting of existing improvements are not leasehold improvements.

 

 

Library Resources

Library acquisitions include regular volumes, books, journals, periodicals, archives, subscriptions, microforms, audio/visual media, CD-ROMs, and electronic resources.

 

Repairs and Maintenance

Expenditures incurred to maintain assets in operating condition. Repairs and maintenance does not usually make the asset more useful or add to the estimated life of the asset. Examples: Land - mending a broken fence, unclogging drainage systems, and repainting park benches. Building - replacing old carpet with new carpet, repainting interior or exterior, mending a roof (not replacing a leaky roof). Equipment - replacing minor parts, lubricating and adjusting, getting a computer cleaned.

 

Repairs and maintenance expenditures are not capitalized and are charged as an operating expense.

 

Works of Art, Literature and Historical Treasures

The University maintains various collections of inexhaustible assets including contributed works of art (paintings, sculptures, and other artifacts), historical treasures (memorabilia, unique and significant structures) and literature (rare books and manuscripts). They are held for exhibition, education, research and furtherance of public service. These collections are neither disposed of for financial gain nor encumbered.

 

Since no value can be practically determined for these assets, such collections are not capitalized.

 

 

Procedure     

For Financial Statement purposes the capitalization requirements are as follows –

 

1.  Movable Equipment having a useful life of one year or more and a total acquisition cost of $5,000 or more per single unit. A single unit is defined as a piece of equipment, that when assembled, functions as a stand-alone unit.

Leased Equipment if it meets the capitalization criteria of Governmental Accounting Standards Board Statement (GASB) Statement No. 62. Please see the definition of Leased Assets in Appendix A.

Donated Equipment having a useful life of one year or more and fair market value of $5,000 or more.

 

2. Buildings, Building Improvements, Land Improvements and Infrastructure having a useful life of one year or more and a cost of $25,000 or more.

Leased Buildings if they meet the capitalization criteria of GASB Statement No. 62. Please see the definition of Leased Assets in Appendix A.

Donated Buildings having a useful life of one year or more and fair market value of $25,000 or more.

 

3. Computer Software having a useful life of one year or more and a cost of $100,000 or more.

Leased Computer Software if it meets the capitalization criteria of GASB Statement No. 62. Please see the definition of Leased Assets in Appendix A.

4.    Other Intangible Assets having a useful life of one year or more and a cost of $25,000 or more.

5. Leasehold Improvements having a useful life of one year or more and a cost of $25,000 or more.

6. Land is capitalized irrespective of cost.

7. Library Books, Reference Materials and Resources are capitalized irrespective of cost.

8. Federally Owned and Other Party Owned Assets are not capitalized unless the title to the asset is transferred to WVU. In that case such assets are capitalized at their fair market value (net book value at the time of transfer).

9. Works of Art, Literature and Historical Treasures are not capitalized.

10. Repairs and Maintenance related expenditures are not capitalized.

Responsibilities

Procedure Development

  • The responsibility for procedure development of this policy rests jointly with the Institutional Accounting, Reporting and Analysis Unit and the Property Management Department of the Financial Services Unit.

Implementation

  • The responsibility for implementation of this policy rests jointly with the Institutional Accounting, Reporting and Analysis Unit and the Property Management Department of the Financial Services Unit.

Interpretation

  • The responsibility for interpretation of this policy rests jointly with the Institutional Accounting, Reporting and Analysis Unit and the Property Management Department of the Financial Services Unit.

Contacts

Additional information or questions regarding this procedure can be obtained by contacting:

  • Institutional Accounting, Reporting and Analysis at 304.293.4008
  • Property Management Department of Financial Services at 304.293.4002.

Related Documents

  • Appendix A of WVU’s Capitalization Policy provides definitions of capital and intangible assets and the total cost of an asset.
  • Appendix B of WVU’s capitalization Policy provides accounting for software development costs. The Higher Education Depreciation Setups document provides the estimated useful lives of depreciable assets.

Appendix A

West Virginia University Capitalization Policy

Definitions

1.      BUILDINGS

Definition

  • Includes buildings purchased or constructed. Construction projects are initially capitalized to construction in progress. Subsequently, the capitalized expenditures are recorded as an asset.

Capitalized Costs

  • If a building is acquired by purchase, the capitalized cost should include purchase price and other incidental expenses incurred at the time of acquisition. If a building is constructed, the capitalized cost should include all reasonable and necessary costs incurred to construct the building and prepare it for its intended use. Such costs could include:
  • Appraisal & Negotiation fees      
  • Surveying & Architect fees   
  • Legal and title fees    
  • Transportation charges                                               
  • Building permits                                
  • Demolition cost
  • Interest during construction               
  • Damage payments                  
  • Land-preparation costs
  • Insurance during construction           
  • Accounting fees                                 
  • Closing cost
  • Facilities Management Services billable rates (including salaries and wages, fringe benefits, and annual operating costs)

2.      BUILDING IMPROVEMENTS

Definition

  • The substitution of a better asset for the one currently used (example - install carpeting where none existed or substitute a concrete floor for a wood floor), or any change to the building which increases its future service potential and extends its useful life (example - substitute a new wooden floor for an old deteriorated wooden floor).    

Capitalized Costs

  • Costs of improvements include expenditures incurred to increase the service potential of the building including the contract price, engineering, architectural, and attorney’s fees.  These costs can include the rates charged by Facilities Management Services (which include salaries and wages, fringe benefits, and annual operating costs).

3.      COMPUTER SOFTWARE

Definition

  • Includes computer software acquired for internal use. Generally, only institutionally significant systems with a cost of $100,000 or greater are capitalized. Also includes major modifications (such as an upgrade) to the software.

Capitalized Costs

  • Costs related to the external purchase of software applications, including installation expenses, that are $100,000 or greater, should be capitalized.  Fees paid for training and software maintenance should not be capitalized and should be expensed.  External costs of upgrades and enhancements that enable the software to perform tasks that the software was not previously capable of performing may be capitalized. Bulk purchases of software should not be capitalized if the unit cost is less than $100,000.
  • Annual software site license renewals are not capitalized and should be expensed.
  • The cost of internally developed software for internal use includes internal and external costs associated with the application development stage of the software. Allowable costs to be capitalized include the acquisition cost of the software including licensing agreement, cost of contract services associated with the project (such as consulting fees), cost of capital items purchased solely for the project, travel costs, payroll and payroll-related costs of employees directly assigned to the project, and interest costs incurred during application development. Please see Appendix B for details.

4.       OTHER INTANGIBLE ASSETS

Definition

  • An intangible asset is an asset that 1) lacks physical substance, 2) is nonfinancial in nature and 3) has an initial useful life of one year or more.  This includes right-of-way and other types of easements, water rights, timber rights, patents, copyrights, trademarks, licenses and permits with a cost of $25,000 or more.  This also includes gifts of software with rights to use.  This does not include assets acquired primarily for the purpose of directly obtaining income or profit. 
  • The useful life of an intangible asset should not exceed the period to which the service capacity of the asset is limited by contractual or legal provisions.  An intangible asset should be considered to have an indefinite useful life if there are no legal, contractual, regulatory, technological, or other factors that limit the useful life of the asset.  Intangible assets with indefinite useful lives should not be amortized.

Capitalized Costs

  • Costs related to the purchase or license of the asset and/or costs related to internally generated assets (those created or produced by the institution or an entity contracted by the institution).

5.      DONATED ASSETS

Definition

  • Assets received in a voluntary non-reciprocal transfer from another entity such as gifts of capital assets.

Capitalized Costs

  • Donated assets are recorded at their fair market value or appraised value at the time of gift in accordance with the applicable capitalization threshold.

6.      EQUIPMENT

Definition

  • An article of non-expendable, tangible personal property that is free standing, movable, is complete in itself, does not lose its identity when affixed to or installed in other property and has a useful life greater than one year. Includes delivery equipment, office equipment, machinery, furniture and fixtures, factory equipment, instruments and vehicles. Also includes the following –

Fabricated Equipment

  • Fabricated equipment includes self-constructed equipment where the total unit cost incurred to fabricate the equipment is $5,000 or more. Components include enhancement parts that materially and permanently increase the value or useful life of equipment. A system with multiple components which cannot operate independently of each other and together cost $5,000 or more will also be capitalized. The rule-of-thumb is that for a component to be included in the original acquisition cost of a piece of equipment, it should be an attached or installed option which, as assembled, is expected to operate as one unit for the remainder of its life.

 

Exceptions to Equipment

  • Exceptions to the equipment definition are:
    • Assets purchased as repair parts for existing parts in previously tagged equipment.
    • Materials used in repair or replacement in previously tagged equipment.
    • Household equipment (drapes, bedding, carpet replacement).
    • Built-in equipment – such items become part of the building or structure after installation and may be capitalized as building improvements. For example – built-in cabinets, garbage disposals, furnaces, and air conditioners. Please see the definition of Building Improvements.
    • Livestock – is neither tagged nor capitalized.

Capitalized Costs

The cost of equipment includes all expenditures incurred for the equipment and preparing it for its intended use. This includes the invoice purchase price, one-time charges for freight and handling, insurance on the equipment while in transit, cost of special foundations if required, assembling and installation costs, and blueprint and development costs if applicable.

7.      FEDERALLY OWNED ASSETS

Definition

  • Includes assets purchased with federally sponsored award funds. These federally funded assets are tagged, recorded and tracked in WVU’s Fixed Assets System but are not reported on the Financial Statements of the University. The title to such assets generally remains with the federal sponsor. However, in some situations the federal sponsor may transfer the title of the asset to WVU.

Capitalized Costs

  • Federally funded assets are recorded in the Fixed Assets System at their acquisition cost, as provided by the government, plus any transportation and installation costs. When the title to such assets is transferred to the University, the asset’s ownership is changed to WVU in the Fixed Assets System and the appropriate net book value is recognized. If the asset’s cost is less than $5,000, the record is removed from the Fixed Assets System.

8.      OTHER PARTY OWNED ASSETS

Definition

  • Includes assets purchased with sponsored award funds (other than federal funds) or assets furnished by the sponsor (non-federal). These sponsor funded or sponsor furnished assets are tagged, recorded and tracked in WVU’s Fixed Assets System but are not reported on the Financial Statements of the University. The title to such assets generally remains with the sponsor. However, in some situations the sponsor may transfer the title of the asset to WVU.

Capitalized Costs

  • Such assets are recorded in the Fixed Assets System at their acquisition cost, as provided by the sponsor, plus any transportation and installation costs. When the title to such assets is transferred to the University, the asset’s ownership is changed to WVU in the Fixed Assets System and the appropriate book value is recognized.  If the asset’s cost is less than $5,000, the record is removed from the Fixed Assets System.

9.      FEDERALLY FURNISHED ASSETS

Definition

  • Includes assets directly acquired by and in the possession of the government and subsequently furnished by the government to the University as part of a sponsored award. These federally furnished assets are tagged, recorded and tracked in WVU’s Fixed Assets System but are not reported on the Financial Statements of the University. The title to such assets remains with the federal sponsor and the assets are returned to the government at the end of the contract or sponsored award through which it is provided.

Capitalized Costs

  • Federally furnished assets are recorded in the Fixed Assets System regardless of their cost. 

10.  INFRASTRUCTURE

Definition

  • Long-lived capital assets that are part of a network of assets that can have service potential for an extended period and that are normally stationary. Example of infrastructure networks – roads, sidewalks, electrical, sewer and water systems, fiber optic cabling system, transit systems, bridges, dams and tunnels.

Capitalized Costs

  • All expenditures incurred to acquire or construct infrastructure assets are capitalized. These expenditures can include the rates charged by Facilities Management Services (which include salaries and wages, fringe benefits, and annual operating costs).

11.  LAND

Definition

  • Land purchased by WVU or acquired by gift or bequest.

Capitalized Costs

  • All expenditures incurred to acquire land and to prepare it for its intended use. These costs include purchase price, closing costs, and assumption of any liens, mortgages, or encum­brances on the land. Land acquired by gift should be recorded at its fair market value.

12.  LAND IMPROVEMENTS

Definition

  • Any improvements with a limited life made to ready land for its intended use that is not part of an infrastructure network. Examples of land improvements -  parking lots, landscaping, benches, fountains, bleachers, retaining walls, septic systems.

Capitalized Costs

  • These include costs incurred in preparing land for its intended use (grading, filling, draining) and any additional land betterments. These costs can include the rates charged by Facilities Management Services (which include salaries and wages, fringe benefits, and annual operating costs). If buildings are razed to prepare the land for its intended purpose, the cost of razing the buildings should be capitalized as land improvements.

13.  LEASED ASSETS

Definition

Assets that are purchased under lease purchase contracts or agreements. Leased assets are capitalized if the non-cancelable lease agreement meets any one of the following requirements (as prescribed by GASB Statement No. 62) –

I.      The lease transfers ownership of the property to the lessee (WVU) by the end of the lease term.

II.      The lease contains a bargain purchase option, i.e., allows the lessee (WVU) to purchase the asset for a price that is substantially lower than the expected fair value of the asset at the date the option becomes exercisable.

III.      The lease term is equal to 75 percent or more of the estimated economic life of the leased property.

IV.      The present value of the minimum lease payments at the inception of the lease equals at least 90 percent of the fair value of the leased property.

Lease agreements not meeting any one of the above criteria are considered operating leases and not capitalized. The period payments are recorded as an expense.

Capitalized Costs

  • The purchase price of the asset is capitalized. Interest cost is recorded as an expense.

14.  LEASEHOLD IMPROVEMENTS

Definition

  • Improvements to land and building leased by the University. These may include walls and partitions, electrical wiring and fixtures, heating and cooling systems, roofing and plumbing. Repair, maintenance and painting of existing improvements are not leasehold improvements.

Capitalized Costs

  • Total cost of alterations made to the leased land or building. These costs can include the rates charged by Facilities Management Services (which include salaries and wages, fringe benefits, and annual operating costs). 

15.  LIBRARY RESOURCES

Definition

  • Library acquisitions include regular volumes, books, journals, periodicals, archives, subscriptions, microforms, audio/visual media, CD-ROMs, and electronic resources.

Capitalized Costs

  • Library books and reference materials are capitalized at purchase cost or fair market value for donated books and gifts. Library books are considered a composite asset. Annually, the value of books lost, stolen, destroyed or disposed is deducted from the composite capitalized value of library books.

16.  REPAIRS AND MAINTENANCE

Definition

Expenditures incurred to maintain assets in operating condition. Repairs and maintenance does not usually make the asset more useful or add to the estimated life of the asset. Examples –

  • Land: mending a broken fence, unclogging drainage systems, and repainting park benches.
  • Building: replacing old carpet with new carpet, repainting interior or exterior, mending a roof (not replacing a leaky roof).
  • Equipment: replacing minor parts, lubricating and adjusting, getting a computer cleaned.

Repairs and maintenance expenditures are not capitalized and are charged as an operating expense.

17.  WORKS OF ART, LITERATURE AND HISTORICAL TREASURES

Definition

  • The University maintains various collections of inexhaustible assets including contributed works of art (paintings, sculptures, and other artifacts), historical treasures (memorabilia, unique and significant structures) and literature (rare books and manuscripts). They are held for exhibition, education, research and furtherance of public service. These collections are neither disposed of for financial gain nor encumbered.

Since no value can be practically determined for these assets, such collections are not capitalized.

  • West Virginia University Capitalization Policy
  • Accounting for Software Development Costs

Outline

A.    Background

  • WVU following Governmental Accounting Standards Board Statement No. 51, “Accounting and Financial Reporting for Intangible Assets”

B.     Definition of Internally Developed Software for Internal Use

  • Characteristics

C.     Stages of Software Development

  • Preliminary
  • Application development
  • Post-implementation/operation

D.    Capitalization of Software Costs

  • When to capitalize – when to begin and when to cease
  • Allowable costs to be capitalized
  • Amortization/depreciation of capitalized costs
  • Useful life of capitalized costs
  • Capitalization threshold

E.     Upgrades/Internally Generated Modification of Software Already in Operation

F.      Costs of Website Development

GASB: Governmental Accounting Standards Board

Capitalization: Recording costs incurred as an asset instead of an expense

A.    Background

  • State and local governments, including public higher education institutions, are required to follow GASB Statement No. 51, “Accounting and Financial Reporting for Intangible Assets”.
  • Capitalization of costs associated with developing or obtaining software for internal use is required because such expenditures have future benefits. Software is an important strategic or economic resource of the institution and the development and implementation of software is not conceptually different from the process of creating a tangible or hard asset.

B.     Definition of Internally Developed Software for Internal Use

  • Internally generated software is defined as software that is developed internally or by a third party contractor on behalf of the institution.  Commercially available software that is purchased or licensed by the institution and modified using more than incremental effort before being put into operation is also considered to be internally generated.
  • Software that is acquired or created primarily for the purpose of directly obtaining income or profit is excluded from this definition.

C.    Stages of Software Development

  • Preliminary Project Stage

    (Costs should be expensed as incurred & not capitalized)

    Includes the following activities:

    • conceptual formulation of alternatives
    • evaluation of alternatives
        • assembling the evaluation team
        • evaluating vendors’ proposals
        • considering other reengineering efforts
    • determination of existence of needed technologies to develop the software
    • final selection of alternatives

    Application Development Stage

      (Cost Accumulation Phase)

      • Includes the following activities:
      • design of chosen path including software configuration and software interfaces
      • coding
      • installation of computer hardware
      • testing, including parallel processing phase
      • Post-Implementation/Operation Stage (Costs should be expensed as incurred & not capitalized)

      Includes the following activities:

      • training
      • application maintenance
      • data conversion

       D.    Capitalization of Software Costs

      When to capitalize

      Capitalization of costs should begin when both:

      a)      the Preliminary Project phase is complete and

      b)      the institution’s management has authorized or committed to funding the software project with the intent it will be completed and used to perform its planned functions.

      For commercially developed software that will be modified to the point that it is considered to be internally generated, (a) and (b) are considered to have occurred upon the institution’s commitment to purchase or license the software.

      Capitalization should cease no later than the time at which the software is substantially complete and operational. 

      The University’s capitalization threshold is $100,000.

      Allowable costs to be capitalized

      The following internal and external costs associated with the Application Development phase should be capitalized:

      External direct costs from third party transactions including:

      • Cost of obtaining software from third parties, including licensing agreement
      • Cost of contract services associated with the project
      • Cost of capital items purchased solely for the project

      Payroll & payroll-related costs including:

      • Salaries and benefits of all personnel formally assigned to the software development project (i.e., employees who are directly associated with and devote time to coding, installing or testing the internal use software)
      • Travel costs incurred by employees in their duties directly associated with the software development
      • Interest costs incurred during application development
      • Cost of developing or obtaining bridging software (software that allows for access or conversion of old data by new information systems) only if there is an alternative future use to such software.
      • Data conversion, only to the extent that it is determined to be necessary to make the software operational. 

      The following costs should not be capitalized:

      • general and administrative costs
      • overhead costs (rent, security or building maintenance)
      • training costs
      • maintenance costs

       

      Amortization/depreciation of capitalized costs

      • Useful life of capitalized costs should exceed one year. In accordance with WVU’s capitalization policy, capitalized software will be amortized/depreciated over 5 years.
      • Accumulated costs of developing software for internal use should equal or exceed $100,000 for capitalization.

      E.     Upgrades/Internally Generated Modification of Software Already in Operation

      • Internally generated modification of software that is already in operation should be capitalized if the modification results in any of the following:
      • An increase in the functionality of the software, that is, the software is able to perform tasks that it was previously incapable of performing
      • An increase in the efficiency of the software, that is, an increase in the level of service provided by the software without the ability to perform additional tasks
      • An extension of the estimated useful life of the software.
      • If the modification does not result in any of the above outcomes, the modification should be considered maintenance and the associated costs should be expensed as incurred.

      F.      Costs of Website Development

      • Not accumulating costs since current standards do not apply to public higher education institutions.

       

      Originally Issued: July 1, 2010
      Updated: February 8, 2016
      Approved by: Daniel A. Durbin, Senior Associate Vice President for Finance