12.0 - Fabricated Equipment

SUBJECT:

SOURCE:

ORIGINAL DATE

OF ISSUE:

DATE OF

LAST REVIEW:

CSOP NO:

RATIONALE:

CSOP:

Fabricated Equipment

Capitalization of Fabricated Equipment

Fabrication Request Document

Preparation of a Requisition for Fabricated Equipment

Fabrication Review

Fabricated Equipment

• Original Development The fabrication construction creates a one-of-a-kind piece of equipment that is built (designed) and assembled from individual parts.
• Original Components   The original components bear no relationship to the finished equipment and should be attached to, or internal to the finished equipment. The original components should not be equipment that can be used independent of the fabricated asset.
  
  

The term fabrication is not synonymous with a project. For example, a grant may be given to a researcher for the purpose of completing a specific project that will require that several capital assets be fabricated. Each asset must have a fabrication document with an asset number assigned.

Capitalization of Fabricated Equipment

The cost of individual components may be less than $5,000 each; however, the finished, tangible asset must have a total cumulative cost of at least $5,000 in order to be capitalized. Components having an acquisition value of $5,000 or more will be capitalized on their own merit if they are, or can be, stand alone equipment. Materials, parts and direct labor can be capitalized if they meet the ownership and location tests.

Direct labor for fabrications is defined as all hands-on assembly labor of the fabricated equipment, plus the direct supervision of that hands-on labor. Labor associated with research and the design of a fabricated asset should be expensed. In addition, labor costs that are impossible or impractical to trace to a specific fabrication should be expensed.

Ownership and Location Tests

If the fabricated asset is to be owned by IU (regardless of where it will be used), the costs to fabricate the asset including materials, parts, and direct labor should be capitalized. The object code of 7500 should be used in these situations.

If the fabricated asset will not be owned by IU but will be located at IU, the costs to fabricate the asset including materials, parts, and direct labor should be capitalized because the asset must be inventoried. The object code of 7531 or 7532 should be used in these situations depending on whether the owner is a federal entity.

If the fabricated asset will not be owned by IU, not located at IU, and the grant does not require IU to track the asset, then the components should be purchased with a supplies and expense object code.

Fabrication Request Document

• account
• campus
• building code
• description
• room number
• asset type code must be 40000 (Construction in Progress)
• estimated completion date
• estimated life
• estimated cost
• fiscal officer's approval

When the Fabrication Request is reviewed by the University Capital Asset Office they may ask for a copy of the project proposal, a list of components, and the ownership and location of the asset when in use. This will help determine if the request should be considered fabricated equipment.

Preparation of a Requisition for Fabricated Equipment

*A federally owned object code should be used when the federal granting agency holds title to the asset.

The use of a fabrication object code will trigger the purchase order to create the Asset Configuration Document. To complete the configuration document, click on the “Items to be configured” link. Click the select all button; next click the modify asset button. Enter your fabrication asset number and click the add button. The asset number will ensure that all payments are applied to the correct fabricated piece of equipment. When the document is submitted, the PO is sent to the supplier.

The fabricated asset will remain as construction in progress until Capital Asset Management is notified that the asset is substantially complete and ready for its intended purpose. To request a Fabrication Substantial Completion form send an email to capasset@iu.edu.

Fabrication Review

In April/May, the University Capital Asset Office will request that organizations review the status of active fabrications. This review is to ensure that any fabrications that have been completed and placed in service are set to depreciate in CAMS. See CSOP 13.0 Certificate of Substantial Completion .

When the fabrication is completed, the organization should complete a Certificate of Substantial Completion for Movable Fabrications.  Fabrications should be closed when the asset is placed into service.  The University Capital Asset Office will assign the create date and asset type code from information entered on the Certificate of Substantial Completion for Movable Fabrications. At this point the asset will begin to depreciate and is ready for the assignment of the IU tag. It is highly recommended that the department review their open fabrications in October/November. The Review Open Fabrications report can be found in IUIE Kuali Financial/Capital Asset Management System/Edit Reports/Review Open Fabrications.

DEFINITIONS:

Capital Equipment- must have an acquisition value of at least $5,000 and a useful life expectancy of one year or more.

Equipment- The term “equipment” includes delivery equipment, office equipment, machinery, furniture and fixtures, factory equipment and similar fixed assets.

Direct labor for fabrications is defined as all hands-on assembly labor of the fabricated equipment, plus the direct supervision of that hands-on labor.

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