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Business and Financial Policies and Procedures

Definitions

Antiques and Works of Art
Antiques are objects older than 40 years that possess special historical value. Works of art are of special cultural or scientific interest. Antiques and works of art are subject to special control and disposition regulations.

Asset
An asset is anything owned by the University that has a monetary value--usually its cost or fair market value.

Capitalization
Capitalization means to classify the cost of an item as a long-term asset because the item will be used over a period of time. Therefore, the cost is not charged against the earnings of one fiscal year as part of day-to-day operations. It is charged over several fiscal years.

Depreciation
The benefits the University gets from a fixed asset extend over several years. Because of "wear and tear" the asset is "used up" or "consumed" over that time period. Therefore, the value of the asset is incrementally reduced annually; this is referred to as depreciation.

Equipment
Equipment is tangible property (other than land or buildings) of a more or less durable nature that is useful in carrying on the operations of a business. Regardless of cost, equipment is considered University property and must be managed according to University Policies and State Law. For additional information on the types of equipment, consult Classify Equipment and Property.

FABweb
The official record of University property is stored in Banner Fixed Assets. FABweb is a web-based application units use to manage the records in Banner Fixed Assets.

FABweb Equipment Attributes
Attributes are characteristics of equipment that help to identify each unique item. Attributes include such information as description, serial number, manufacturer, and location. Keeping this information up to date makes conducting the biennial inventory easier.

Fair Market Value
The most probable price that could be paid for equipment or property by average, informed purchasers.

Fixed Assets
Fixed assets are sometimes referred to as PPE (property, plant, and equipment). They are called "fixed" because they cannot easily be liquidated or converted into cash (liquid assets). These assets are purchased for continued and long-term use in conducting the University's business. They include land, buildings, machinery, furniture, computers, tools, etc.

General Use Property
The term "general use" refers to property that is usable by all units or by various units in general. It is considered to be in the custody of the Executive Director of Facilities and Services (Urbana), Director of Facilities Management (Chicago), or the Director of Physical Planning and Operations (Springfield). They report on general use property in the same manner as the head of any unit.

Intangible Assets
An intangible asset has no physical substance, is not financial in nature, and has an initial useful life longer than a fiscal year. Examples include software; intellectual property such as patents, copyrights, royalties, or trademarks; and easements.

Moveable Equipment
Moveable equipment is not permanently attached to a building or grounds as fixed equipment or an improvement other than buildings. For a more complete definition, see Classify Equipment and Property.

Non-Cash Addition Equipment
A non-cash addition is equipment that is not in Banner Fixed Assets and should be because it is owned by the University. This can happen when the item is found or acquired through donation, loan, or transfer from another institution. It will not automatically appear in your list of FABweb new acquisitions. Therefore, you must enter it in FABweb. Identify Donated, Found, and Other Non-Cash Addition Equipment. Add Donated, Found, and Other Non-Cash Addition Equipment to FABweb.

PTag
The Permanent Tag number printed on the label and used to identify an asset record in Banner Fixed Assets.

Property Accounting
Property accounting refers to the methods used by the University to account for the cost of fixed assets and to track their location, condition, and use.

Self-Supporting Activities
Self-supporting activities generate revenue. They are tracked in Banner by their fund code which includes an Entity code. Entity codes identify self-supporting entities to:

  • Exclude self-supporting activities from the Facilities and Administrative Rate (F&A) charged to grants.
  • Depreciate equipment when tracking and comparing the unit or activity's expenses to revenue.

Scrap
A piece of equipment is considered scrap if it does not work and is not usable. Unusable scrap equipment must be disposed of according to State of Illinois regulations and may not be used for private benefit.

Supplies
Supplies are those items that are "used up" or consumed in the course of a year. Supplies include such items as paper, toner cartridges, glassware, batteries, or replacement parts.

Surplus
Unneeded equipment is considered surplus equipment if it is still functional. Surplus equipment is transferred to a campus surplus warehouse and made available for use by another University unit.

Trade-In
Trade-ins are only allowed when the vendor you are purchasing the item from provides a trade-in allowance value on the new equipment being purchased, thereby reducing the cash spent to buy the new equipment. Make sure the trade-in allowance and values are explicity listed and included on the purchase requisition and purchase order, and stated by the vendor on the vendor invoice. University Property Accounting and Reporting (UPAR) adds the value of the vendor stated trade-in allowance to the cost basis of the newly purchased equipment items. Asset values will be understated if trade-ins occur and the trade-in allowances are not identified as part of the new acquisition of equipment.

Useful Life
The length of time that an asset is expected to be used.

Related Policies and Procedures

Identify Donated, Found, and Other Non-Cash Addition Equipment
Add Donated, Found, and Other Non-Cash Addition Equipment to FABweb
Classify Equipment and Property

Last Updated: June 1, 2011 | Approved: Senior Associate Vice President for Business and Finance | Effective: June 2011

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