6 : The Capital

Part 1. PurposeTo account for the capital assets of the Minnesota State colleges, universities, and system office in conformity with Generally Accepted Accounting Principles (GAAP) and Governmental Accounting Standards Board (GASB) pronouncements.

6 : The Capital

Subpart D. Construction-in-Progress Construction-in-progress contains amounts expended in one fiscal year on a new construction, land or building improvement, or other capital construction project that will be finished in a future year. Depreciation expense for new construction will not be recognized until completion of construction.

Subpart G. Sensitive items and capital assets purchased with federal funds All sensitive items will be entered on the Equipment Module. Examples of sensitive items are weapons (firearms, swords, crossbows, etc.), electronic equipment (computers, projectors, etc.), or other items that could lead to a material loss or liability.

All capital assets purchased with federal funds with a cost of $5,000 or more will be entered on the Equipment Module, and inventoried, at a minimum, on a two (2) year cycle (see Physical Inventory section below).

Subpart I. Works of art, historical treasures, and other similar assets Works of art, historical treasures, and other similar assets generally have to be capitalized at their historical cost (or estimated fair market value at the time of donation) whether they are held as individual items or in a collection.

Subpart B. Capital assets - donated Donated capital assets will be reported in the statement of net position based on estimated fair market value (FMV) at the date of receipt plus any ancillary expenses incurred to place the asset into service. Capital assets donated to a college or university must comply with Board Policy 7.7 Gift and Grants Acceptance.

Subpart A. Purchase The cost of a capital asset includes not only its purchase price, but also ancillary expenses necessary to place the asset in its intended location and condition for use. Estimated costs for assets may be necessary because of a lack of original documents or because establishing original cost is not practical.

Part 7. Costs Subsequent to Acquisition (Improvements or Betterments). Costs incurred to achieve greater future benefits (e.g., improves efficiency, or materially extends the useful life of the asset, etc.) should be capitalized, whereas expenses that simply maintain a given level of service should be expensed. Generally four major types of costs subsequent to original construction are incurred relative to existing capital assets.

Subpart A. Additions, extensions, enlargements, or expansions Any addition to a capital asset should be capitalized since a new asset has been created. For example, the addition of a wing to a building or the addition of an air conditioning system increases the service potential of that facility and should be capitalized. Other examples of additions include:

In both of these instances, the college or university should determine whether the expenditure increases the future service potential of the capital assets, or merely maintains the existing level of service. When the determination is made that the future service level has been increased, the new cost is capitalized.

For additions and improvements, the carrying amount of the old assets and associated accumulated depreciation, if applicable, must be removed, if the amount is known. The cost of the new asset should be capitalized. If the original cost and accumulated depreciation are not known, capitalize the additional cost.

Subpart C. Reinstallations and rearrangements These are costs that will benefit future periods but do not represent additions, replacements, or improvements. If the original installation cost can be estimated, along with the accumulated depreciation to date, the cost may be handled as a replacement and subpart B Improvements and replacements, must be followed. Where the original cost is not known, the reinstallation or rearrangement cost should be capitalized.

Ordinary repairs are expenses made to maintain plant assets in operating condition. Preventive maintenance, normal periodic repairs, replacement of parts, structural components, and other activities such as repainting or equipment adjustments, that are needed to maintain the asset so that it continues to provide normal services must not be capitalized but rather charged to an expense account. Ordinary repairs must be expensed.

In some instances, implementation of this policy may be difficult due to the unique nature of the acquisition. In these cases, professional judgment must be exercised in determining whether the efforts outweigh the benefits derived from applying capitalization.

Subpart E. Betterments Betterments include expenses of $10,000 or more that become permanent parts of an existing depreciable capital asset (with an original cost of $10,000 or greater) and can improve the asset by meeting one or both of the following criteria:

Part 8. Capitalization Thresholds and Depreciation. Depreciation is the method of allocating the cost of assets, having a life of more than two accounting periods, over the benefited accounting periods. Each college and university must set appropriate useful lives for depreciable capital asset categories consistent with local use and experience.

Part 9. Accounting for Capital Assets Removed When a new asset substitutes for an old asset as a result of an addition, improvement, or a major repair, all costs must be capitalized in one of two ways, depending upon the circumstances:

05/17/16 - Formatting changes throughout, including splitting parts for clarity, adjusting capitalization, and small changes to verbiage. Deleted Part 1, Authority. Deleted Part 2, Capital assets. Amended Part 3, Subpart F to clarify sensitive items that are required to be tracked. Amended Part 3, Subpart G to further define sensitive items. Added Part 3, Subpart L, Intangible assets. Amended Part 5, Subpart B, to clarify FMV should be calculated for each type of asset. Amended Part 6, Subpart A to include Assumption of liens or mortgages to the costs to be capitalized associated with land acquisition. Amended Party 12 to reflect current practice.

6/10/09 - Due to technical accounting updates to capitalization conventions and amounts (in part to bring MnSCU capitalization amounts into an approximate materiality adjusted equivalency with Minnesota Management and Budget guidelines)

The change of value that occurs in the caseof money intended to be converted into capital, cannot take place in themoney itself, since in its function of means of purchase and of payment,it does no more than realise the price of the commodity it buys or paysfor; and, as hard cash, it is value petrified, never varying. [1] Just as little can it originate in the second act of circulation, the re-sale of the commodity, which does no more than transform the article from itsbodily form back again into its money-form. The change must, therefore,take place in the commodity bought by the first act, M-C, but not in itsvalue, for equivalents are exchanged, and the commodity is paid for atits full value. We are, therefore, forced to the conclusion that the changeoriginates in the use-value, as such, of the commodity, i.e., in its consumption.In order to be able to extract value from the consumption of a commodity,our friend, Moneybags, must be so lucky as to find, within the sphere ofcirculation, in the market, a commodity, whose use-value possesses thepeculiar property of being a source of value, whose actual consumption,therefore, is itself an embodiment of labour, and, consequently, a creationof value. The possessor of money does find on the market such a specialcommodity in capacity for labour or labour-power.

For the conversion of his money into capital, therefore, the ownerof money must meet in the market with the free labourer, free in the doublesense, that as a free man he can dispose of his labour-power as his owncommodity, and that on the other hand he has no other commodity for sale,is short of everything necessary for the realisation of his labour-power.

One consequence of the peculiar nature of labour-power as a commodityis, that its use-value does not, on the conclusion of the contract betweenthe buyer and seller, immediately pass into the hands of the former. Itsvalue, like that of every other commodity, is already fixed before it goesinto circulation, since a definite quantity of social labour has been spentupon it; but its use-value consists in the subsequent exercise of its force.The alienation of labour-power and its actual appropriation by the buyer,its employment as a use-value, are separated by an interval of time. Butin those cases in which the formal alienation by sale of the use-valueof a commodity, is not simultaneous with its actual delivery to the buyer,the money of the latter usually functions as means of payment. [12]In every country in which the capitalist mode of production reigns, itis the custom not to pay for labour-power before it has been exercisedfor the period fixed by the contract, as for example, the end of each week.In all cases, therefore, the use-value of the labour-power is advancedto the capitalist: the labourer allows the buyer to consume it before hereceives payment of the price; he everywhere gives credit to the capitalist.That this credit is no mere fiction, is shown not only by the occasionalloss of wages on the bankruptcy of the capitalist, [13]but also by a series of more enduring consequences. [14]Nevertheless, whether money serves as a means of purchase or as a meansof payment, this makes no alteration in the nature of the exchange of commodities.The price of the labour-power is fixed by the contract, although it isnot realised till later, like the rent of a house. The labour-power issold, although it is only paid for at a later period. It will, therefore,be useful, for a clear comprehension of the relation of the parties, toassume provisionally, that the possessor of labour-power, on the occasionof each sale, immediately receives the price stipulated to be paid forit. 041b061a72