Policies & Procedures Manual - Elizabeth City State University

400.1.58Adopted: 06/14/05DefinitionELIZABETH CITY STATE UNIVERSITYFixed Assets - Renovations and ImprovementsRenovation and improvement costs are incurred to restore or improve buildings or othercapitalized assets. These costs involve the substitution of old parts for new ones and increase theeconomic benefits to be derived from the asset.Two Criteria RequiredTwo criteria must be met in determining whether or not a renovation or improvement cost shouldbe capitalized. The first criteria is whether the expenditure significantly extends the useful life ofthe original asset. The second is if the expenditure exceeds the $5,000 capitalization threshold. Ifboth of these criteria are met , the expenditure must be capitalized. Expenditures not meetingboth of these criteria should be classified as a maintenance expense. Care must be taken whendistinguishing between maintenance and renovation and improvement costs.Assets > $5,000 = Cap Assets < $5,000 = ExpAssets valued below $5,000 are expensed and are not capitalized or depreciated. If an asset costsbetween $500 and $4,999, it may be listed on the fixed assets system as an inventoried asset.Removing Cost = Exp Adding Renov = CapIf parts of an asset are removed during a renovation/improvement project, the original cost (lessdepreciation, if applicable) of the part of the asset being removed should be eliminated from theFixed Assets System. Because of the difficulty of measurement or of immateriality, this may notbe possible. The removal costs associated with the renovation should be expensed. Theremaining cost of adding the renovation would be the cost of the new asset.