FINANCIAL MANAGEMENT POLICY MANUAL

(1) General purpose vehicles, ADP (IT) systems and hardware,
high tech medical equipment, equipment used in RDT&E, radio
and television broadcasting equipment, commercial software, and
improvements to 5 year recovery period property (personal
property)-5 years;
(2) all other equipment and machinery, and software,
improvements to 20 year recovery period property-10 years;
(3) vessels, steam and electrical generation equipment and other
utilities, fences, roads, bridges, sewers, ships and railroad wharves
and docks, dry docks, fuel storage facilities, etc. and improvements
to 40 year recovery period property-20 years;
(4) buildings, hangars, warehouses, fuel storage buildings, air
traffic control towers, and other real property structures-40 years.
Refer to DOD 7000.14-R, Financial Management Regulation, Volume
2B Chapter 6 and Volume 4, Chapter 6 for additional information on
depreciation.
Assets that are partially depreciated when capitalized to the NWCF
shall be depreciated for the remaining cost over the remaining useful
life. Assets that are older than the criteria provided above will be
considered fully depreciated. For new acquisitions, depreciation will
commence during the year of delivery.
5. RECOVERY OF COSTS.
All business areas are required to set their prices based upon full cost
recovery, including general and administrative support provided by others.
DOD 7000.14-R, Financial Management Regulation, Volume 2B Chapter
9 provides specific cost recovery guidance.
a. Price Setting.
Prices are established through the budget process and, except for
Depot Maintenance operations and Central Design Agent Activity
Groups, remain fixed during the year of execution; actual costs are
evaluated against revenue generated by workload at established prices;
and the financial condition of the business area assessed accordingly.
Profits or losses will be determined at the end of the year and will be
employed as a basis for evaluating operating efficiency.
b. Rate Stabilization.
Prices for every business area are established for each fiscal year.
Once established, these prices are held constant, or stabilized, through
program execution. This stabilized rate policy serves to protect
customers from unforeseen inflationary increases and other cost
uncertainties and to assure customers that they will not have to reduce
Financial Management Policy
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