Depreciation of Assets
It is a fundamental accounting concept to match expenditure against the income that it helps to generate and for assets, this is done by depreciation.
First, the cost of the asset is capitalised and transferred to the University's balance sheet from the income and expenditure account. Then, in each accounting period, a depreciation charge is levied on the income and expenditure account to write off the cost. This means that the cost of these assets is split out over a number of years to reflect the contribution they make to the University’s services in future years.
In practical terms, this is done centrally in the Finance Division, so the responsibility of the department is to record the full value correctly in their accounts by selecting the correct purchasing category or project expenditure code when raising a requisition for the purpose of purchasing an equipment item.
For guidance on departmental depreciation for internal funded assets, please see Departmental Additions and Depreciation and:
Guidance on Departmental Asset Additions Depreciation
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University policy on depreciation |
| Equipment |
Depreciated on a straight-line basis over 5 years |
| Specialised Equipment |
Depreciated on a straight-line basis over 7-10 years |
| Software |
Depreciated on a straight-line basis over 5 years |
| Heritage |
Not depreciated |
| Land |
Not depreciated |
| Property |
Fabric of building - 50 years
Mechanical and Electrical (including pipe work) - 20 years
Fixtures and Fittings - 20 years
Equipment associated within a building project (usually fixed in place i.e. lifts) - 10 years
Building refurbishment - 20 years
Freehold Building Services - 20 years
Buildings on National Health Sites - 50 years
Leasehold Properties are reviewed on a case by case basis dependent on the life of the lease.
Landscaping (one-off cost >£100k) - 10 years
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Depreciation and property
Properties that are owned by the University are recorded in the University's Asset Register at cost and it is this figure that is used as the starting point for the subsequent depreciation calculations. Rather than reflecting property values, which rise instead of diminish, this calculation reflects the expense to the University of maintaining the buildings so that they are in a habitable and useable state.
For example, it could be expected that after a number of years the wiring system of a building might become outdated and need replacing. If the building were to be sold at that point of time then it could realise a lower value than the original cost.
The depreciation is considered in isolation to the cost of any maintenance work that is undertaken on a building. These costs would be expensed in the year that they occurred. This is different from construction costs that are incurred when an extension to a property is built, for instance; in this case it is seen as an addition to the existing asset and it would be included in the value to be depreciated.
