Policy Handbook

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Capitalization Policy

Juniata College
Capitalization Policy
Revised 07/8/13

PURPOSE

To establish a financial accounting capitalization policy for land, land improvements, buildings and equipment.

POLICY

This policy applies only to land, land improvements, buildings and equipment used in the operations of the College. Capitalized assets include the following:

Land:

Cost to be capitalized includes all costs connected with acquisition and incurred to prepare the land for its intended purpose. These costs include but are not limited to purchase price, real estate commissions, legal fees, escrow fees, title investigations, title insurance, surveying, clearing, draining and filling land.

If existing buildings on the land will be utilized, a portion of the cost should be allocated to land and a portion to buildings. The fair market value of the land should be recorded, and the value assigned to the building will be the difference between total cost and the amount capitalized as land.

If buildings are razed to prepare the land for its intended purpose, the cost of razing the buildings should be capitalized as land.

Land Improvements:

Cost to be capitalized includes the cost of landscaping, utility systems, paving of parking lots and outdoor public recreation fields with a cost greater than $10,000.  All land improvement costs associated with newly constructed buildings will be capitalized.

Building:

New construction.

Building Renovations

An improvement is the substitution of an asset currently in use with a better asset. (An old air conditioning system is replaced by a more powerful and sophisticated air conditioning system).
 
A replacement is the substitution of an existing asset with a similar asset. (An old air conditioning system is replaced by a new air conditioning system with essentially the same characteristics).
 

Equipment:

Repairs and Maintenance:

These costs should be expensed if they do not provide future benefits. Examples include lubrication of machinery, cleaning of buildings and machinery, replacement of minor parts and painting.

Leases:

Each lease should be reviewed to determine whether it should be expensed or capitalized.

Donated Assets:

Land, buildings and equipment received as a gift will be capitalized at the fair market or appraised value at the time of the gift.

Software: 

The cost of software, whether purchased from an external source or developed internally, is expensed.

Cost of Issuance: 

The cost of issuance in connection with the encumbrance of debt by the College will include all costs associated with the debt.  These costs will be amortized via the straight line method over the life of the loan or bond issue.

 
Sales of Disposals of Capitalized Assets:

The book value of land, land improvements, buildings and equipment will be removed from the general ledger when disposed of or sold.

Depreciation:

The following lives and depreciation methods will be used by the College


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