Property, plant and equipment - acquisition principles

The Australian National University Act section 45 requires that '... the Council must do all things necessary to ensure that adequate control is maintained over the assets owned by, or in custody of, the University'.

Responsibility for the use, maintenance and custody of plant and equipment resides with the heads of budget units. To assist in the discharge of this responsibility, reliable management information regarding the assets in use by their budget unit is required.

Recording of assets

The official record of the University in which the financial and other details of plant, equipment, motor vehicles and artworks are recorded, is known as the ESP Assets Management System (AMS). An official purchase order or contract, raised in accordance with the University's Procurement Policy and Procedures and the Financial Authorisations, is a basic requirement for the purchase of equipment.

Asset books

The University's Asset Books within the AMS are used to store financial information on particular asset classes such as cost, capitalisation thresholds, depreciation attributes and retirement information. Asset books are also used to determine whether accounting entries will be created for asset transactions.

Three asset books have been created within the AMS. They are:

  1. Capital - used for recording and depreciating capitalised assets. Any asset with a value greater than the limit prescribed in the capitalisation policy, excluding works of art and musical instruments, will be recorded in the capital book.
  2. Artworks - used for recording works of art, antiquities and musical instruments. The need for a separate book for this asset is due to the different capitalisation minimum. Note that there is no monetary threshold applicable to the recording of works of art and antiquities in the AMS.
  3. Noncapital - used for recording portable and attractive items. Establishing a separate book for noncapital items allows for the recording of an acquisition cost without having to create accounting entries or depreciate them.

Depreciation attributes which can be found in asset books include:

  1. whether the item is able to be depreciated;
  2. the useful life of the asset;
  3. the depreciation convention; and
  4. the depreciation method and salvage value, if any.

Equipment may be acquired by donation to the University from an outside organisation or individual. The monetary value of a donated item is assessed upon its acceptance by the ANU and this value is confirmed by the manager, Financial Services. When the value equals or exceeds the monetary thresholds for the recording of assets in the University's asset books, the item is recorded in the AMS.

The value is debited to the appropriate non-current asset account and credited to the appropriate gifts received account. These items are properly regarded as being additions to the capital of ANU. When the value is less than the monetary thresholds, and the item is considered to be an attractive item prone to misappropriation, it may be recorded in the AMS without a value being recorded.

In other circumstances, e.g. where non-register items such as expendable materials are donated, the recording action should be to credit gifts received (income) and to debit an appropriate expense account. These items are in the nature of income.

Equipment built or manufactured within the University for long-term use in a particular research unit, laboratory, workshop or other area may constitute a capital expenditure. Any manufactured item:

  • with an expected useful life of more than one year; and
  • whose total cost of manufacture equals or exceeds the monetary thresholds for the recording of assets in the University's asset books is to be capitalised and recorded in the AMS.

The total cost of manufacture is debited by journal entry to the appropriate non-current asset account. The total cost is dissected with those expenditure accounts or a work in progress account, which have/has borne the cost of manufacture being credited, to recover the actual cost of materials, labour and other resources used. Areas involved in making items that need to be capitalised should maintain suitable records or systems to ensure that all costs can be accurately assessed.

In cases where the manufacturing time spans across more than one financial year, the item should be classified as a Work In Progress (WIP) to ensure that the item is not charged to the ledger more than once. With work which takes a long time to complete (i.e. more than twelve months), recoveries should be made on the completion of appropriate stages of manufacture. Eventually, the total cost of manufacture should be fully recovered.

When a manufactured item will last more than one year, but its cost is less than the monetary threshold, and is an attractive item prone to misappropriation, it may be recorded in the AMS - NON-CAPITAL without a value being recorded.

SPF and endowment assets

Assets purchased from Special Purpose Funds (S and Q) and Endowment Funds (E) remain the property of ANU unless specific grant conditions state otherwise. All assets purchased from SPF and Endowment funds are held in the corresponding Recurrent (R) fund and department Number. It is not recommended that assets are held at project/grant level in any fund.

Three Ledger transaction lines are required in AP vouchers to record the asset purchase:

  1. The first line of the asset purchase will be charged against the Special Purpose Fund using one of the series of Transfer (equipment) accounts;
  2. A corresponding credit to the Recurrent (R) Fund is made using the same department code and transfer (equipment) account as in 1 above; and
  3. A corresponding debit to The Recurrent (R) Fund is made using the corresponding asset account.

Adding a component to an existing asset

Material expenditure in improvements of existing assets, excluding normal repairs and maintenance, should be recognised as an increase in the value of assets where:

  1. The expenditure results in an increase in the service capacity or quality of the service provided by the asset; or
  2. There has been an extension to the asset's useful life as a result of the expenditure.
  3. Additions to existing assets should be managed with assistance and advice from F&BS.

Acquisition of artworks or artefacts

Artworks or artefacts are capitalised upon acquisition regardless of their cost.
All artworks and artefacts should be listed in the AMS.

When ANY artwork or artefact is purchased or donated, a record of the acquisition should be initiated, by the completion of the Artworks Acquisition form.

The acquisition form will record the full GST exclusive cost of the item as charged to the general ledger (nominating the charge location) OR the independent valuation of the item if donated under the DCITA Cultural Gifts Program (for CGP donations two valuations are obtained, and an average is brought to account). Other donations may not initially be valued in which case their value will be listed as $1.

The acquisition form will then go to F&BS, and where there is a secondary register, to the area that manages the secondary register (as noted on the acquisition form). Entry in the AMS will be attended to by mutual arrangement between the business office and F&BS, depending on the nature of the acquisition.