Departmental Additions and Depreciation

Process

For Internally Funded Equipment Purchases

Equipment purchases that are deemed internally funded are those that are funded from the departments A1 ledger, with no matched funding release in the Income and Expenditure accounts and will be a cost to the department's overall bottom line, this includes Trust Funds as they have matched funding released.

Note:

We cannot use departmental depreciation on any building related assets, all building related assets including refurbishments, have their depreciation accounted centrally. This is University Policy and cannot be amended. If in doubt please discuss with the Central Fixed Asset team before any budgeting or purchasing is undertaken as this policy cannot be changed.

 

For equipment purchases over £50k, the department's cost centre will be credited with the capitalisation instead of central adjustments. The asset cost will sit on the department's cost centre using the appropriate balance sheet code. Department's will gain visibility of these codes in Oracle Financials but they cannot be coded to by users outside of the central Fixed Asset Team.

Depreciation will be charged monthly via the Fixed Asset module to the department’s depreciation expenditure natural account over the life of the asset (usually 5 years).

Below is a worked example of the accounting:

Department ZT buys a microscope for £50,000 in May. The item is categorised as equipment and is depreciated over a period of 5 years (60 months). As the date placed in service is May, there will be 3 months depreciation charged in the first year. In the sixth year depreciation with stop in April when the 60th depreciation is charged. You can now download an example of the accounting entries.

There may be a need for the Divisional Office to move departmental reserves from a certain cost centre to a central one after a piece of equipment has been purchased and capitalised to ensure that the reserve is ring-fenced for the future depreciation charges. This will be managed by the Divisional Offices in consultation with the department.

For Externally Funded Equipment Purchases

Equipment purchases that are deemed externally funded are those that are funded from the departments A2 ledger or B ledger or on the A1 ledger via a Trust Fund, with matched funding release to the Income and Expenditure accounts.

Departmental assets will be expensed in the department's Income and Expenditure accounts. For purchases over £50k, the capitalisation will be credited to central adjustments with the depreciation taken centrally too.

The expected life of an equipment asset will be 5 years or the remaining life of the project, whichever is shortest.

Budgeting & Forecasting Departmental Depreciation

If you have internally funded assets there will be an impact on your departmental accounts and so you will need to budget and forecast for the depreciation. The depreciation charge will be debiting your main cost centre with natural account 73803.

All the information you will need to do the budgeting and forecasting of depreciation will be provided in the DEL. You will need to use this information and add in a few columns and calculations. Please refer to Using the DEL to budget and forecast depreciation for more information.

 
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