Property Menu - Property Manual - Chapter 2

Equipment Leases

Regardless of how it is acquired, capital assets in Stanford's care must be tracked and maintained. Leased equipment must be handled in this manner. A lease of equipment is similar to a loan, in that it is not owned by Stanford, but is being used by Stanford and may eventually be returned to the original owner. It is different from a loan in that there
is a monetary payment for the use of the equipment. However, if the lease payments are in aggregate $200,000 or greater, the lease may be considered capital for accounting purposes.

Tagging and Recording Leased Equipment

All "capitaltype" leased equipment must be tagged with an SU.ID barcode tag and lease overlay, and recorded in SFA. What is "capitaltype" equipment? Ask yourself this question, "If I were to purchase this item, would it be considered capital equipment?" If
the answer is "yes", then tag the equipment and enter the information into SFA. For example, a copier that, if purchased, would cost would cost more than $5,000 would be an example of "capitaltype"
equipment. For accounting purposes, however, the payments are expensed.

Capital Equipment Leases

A capital equipment lease is capitalized if the total value of the payments excluding any transportation costs is $200,000 or more, and at least one of the remaining four criteria are also met:

Ownership of the leased property is transferred to Stanford by the end of the lease term
The lease contains a bargain purchase option
The lease term is substantially (75% of more) equal to the estimated useful life of the leased property
At the inception of the lease, the present value of the minimum lease payments, with certain adjustments, is 90% or more of the fair value of the leased property.

If an equipment lease is less than $200,000, we treat it as an expense item as discussed above.

Note: Before entering into a capital equipment lease, contact Plant Accounting for more information. Reference the Controller’s Office Capital Lease Accounting webpage.

Disposing Leased Assets

See the Disposal Section for details on the different ways to dispose leased assets.