96-2  Obsolete

Capitalization Threshold Change
April 29, 1996

(Note: This Important Notice is being sent to Account Managers, Chairpersons, Deans and Chancellors. Please forward to others who have a need to know.)

Since, 1979, the threshold amount for capitalization of equipment has been established by OMB Circular A-21 at $500. Inflation since that time has increased the number of items that must be capitalized and, therefore, that must be inventoried and maintained in the asset management system.

Effective July 1, 1996, the threshold amount for the capitalization of equipment will be raised from $500 to $1,000. This is the result of the federal government’s allowing universities to raise their capitalization threshold, and a detailed analysis by Indiana University to determine the optimum threshold for our institution.

The result of this change for grant account managers is that equipment between $500-$1,000 will now be classified as "Supplies and Expense" rather than "Capital Equipment," and it will be charged indirect cost.

For future proposal submissions, it will be necessary to create the budget so that equipment costing less than $1,000 is classified as Supplies and Expense, and the indirect cost for it should be budgeted.

In order to track the new thresholds, we will be changing the threshold amounts on object codes 4910 (Durables-General) and 5200/5215 (Expendable Equipment and Expendable Computer Equipment) effective 7/1/96. Object code 4910 will be used for equipment under $500, and object code 5200/5215 will be used for equipment between $500-$1,000.

For existing grants, equipment between $500-$1000 on object code 5200/5215 will be charged indirect cost, even though the indirect cost would not have been budgeted. If the account manager and RC agree, the account manager may initiate an indirect cost adjustment (which would be routed to the RC for approval), to remove that charge. If the account manager needs assistance in doing the indirect cost adjustment, C&G staff will be available to help. These adjustments should be done only for the 96-97 fiscal year; after 7/1/97, all equipment between $500-$1,000 will be charged indirect cost.

If you have any questions, please contact your C&G Analyst, or the Manager of Contract and Grant Administration at (812) 855-4884.