2.2 Accounting

Acquisition transactions are coded based on equipment type and source of funding. Accuracy is critical to facilitate reconciliation and ensure accurate reporting. Expenditure Type (ET) codes are defined within the University Chart of Accounts.  For detailed information, refer to the "Common Expenditure Types Used for Property and Equipment".

1. Capital Equipment

2. Acquisition Cost

The acquisition cost of an item is a determining factor when assigning a capital equipment Expenditure Type (ET) to the transaction.  The ET also identifies the equipment category, useful life, and ownership.  It is important to select the appropriate ET for any item being acquired.

For items acquired through Stanford’s purchasing process, the acquisition cost is the cost incurred for the initial purchase of an item. Various types of costs may be included in the acquisition transaction. The following table provides specific details of what should or should not be included in the capital costs of an asset acquisition.

3. Valuation of Non-Purchase Acquisitions

For the following acquisition methods the value is provided by the owner or sponsor or it is determined by other means of evaluation such as estimates or appraisals:

• Loans
• No-cost transfer
• Lease
• Rental
• Donation
• Sponsor furnished

Please contact your Property Programs Manager (PPM) for guidance regarding appraisals, cost estimates, or valuation of sponsor-owned equipment.

4. Upgrades to Existing Capital Assets

During the life of a capital asset, there may be a need to upgrade the equipment by acquiring additional components or modifications to the existing instrument. For these costs to be considered a capital upgrade they must meet the following criteria:

• Have an individual cost of $5,000 or greater
• Extend useful life by more than one year
• Significantly enhance the asset’s original functionality

The upgrade component must be assigned its own Stanford barcode and entered separately into Sunflower (SFA) property management database.

5. Software Capitalization

Software is capitalized when:

• It has an acquisition value is $1,000,000 or more, excluding warranty and training, OR
• It is integral to the operation of the equipment at the time of purchase and acquired at the time the instrument is purchased

When the acquisition cost of software is less than $1,000,000, and not integral to the operation of a piece of equipment, it is expensed. Contact your PPM for guidance regarding recording of software in Sunflower or software-related questions.

6. Computer Clusters

Computer clusters are acquired in place of larger supercomputers to perform a task usually assigned to a supercomputer. A cluster consists of computers individually having an acquisition cost less than $5,000 but with an aggregate cost for the cluster purchase of $5,000 or greater.

To qualify for capitalization, a computer cluster purchase must meet all of the following criteria:

• Include a minimum of 24 computer processors
• All work together as parallel computing units for a minimum of three years
• The computer cluster is intended to serve a specific purpose
• The need for a computer cluster must be clearly justified and documented

Note: If any part of the computer cluster needs replacement, the replacement is considered an expense since it is the total value of the cluster that is being used for accountability and depreciation expense purposes.

Upgrades to a computer cluster need to meet all of the following:

• Cost $5,000 and greater
• Extend the original useful life of the cluster by at least one year
• Enhance the asset’s capability beyond its original functionality

7. Vehicle Purchases

Vehicles with an acquisition cost of $5,000 or greater are capital equipment and should be charged to ET 53140. Non-taxable expenses, such as vehicle license and registration fees are not included in the capital acquisition cost. They are expensed costs and should be charged to ET 56510.

8. Fixed Equipment

Fixed equipment must meet all of the following criteria:

• Are part of a building; usually permanently installed
• Are accounted for as a composite cost of the building structure
• Are acquired using a capital project account supplied by the Capital Accounting Department in the Controller’s Office

ET 53145 is the appropriate expenditure type for fixed equipment. They are not recorded in SFA property management database; however, they are recorded in Oracle Fixed Assets (FA) by the PMO Accounting Team.

9. Bulk Equipment

Acquisitions of normally non-capital equipment items, when bought in bulk, are considered capital.  The criteria for being considered a bulk purchase is as follows:

• 25 or more identical items
• On one Purchase Order
• Each unit having a pre-tax cost of $2,000 or more

The total pre-tax cost would therefore be equal to or greater than $50,000.  When these criteria are met, the transaction must be considered as capital.  Use the same expenditure type as similar capital equipment costing over $5,000 per unit (that is, computers would be 53120, lab equipment would be 53115, switches would be 53160, etc.).  Each individual item must be identified (tagged) and recorded in Sunflower, and will be depreciated.

10. Modular Furniture

Modular Furniture must meet all of the following criteria:

• Comprised of components integrated to create work station(s)
• Average cost of a workstation is $5,000 or greater
• Must be acquired using a capital project account supplied by the Capital Accounting Department in the Controller’s Office
• Must use ET 53135
• Not recorded in SFA property management database
• Recorded as a capital project in Oracle Fixed Assets (FA) by the Capital Accounting Department

11. Non-Capital Equipment and Supplies

Acquisitions not meeting the definition of capital equipment are categorized as expense transactions. On Sponsored Projects, these transactions are generally subject to the application of Facilities & Administration (F&A) cost burdening. 

Tracking and management of non-capital equipment and supplies may be required depending on the specific terms and conditions of the sponsored agreement funding the purchase.

12. Accounting for Fabrications

For additional details please visit Chapter 2.6 – Equipment Fabrication