CHAPTER 2: FIXED ASSETS

SUBSECTION 3.2.1.2
ACCOUNTING REQUIREMENTS

3.2.1.2.1

Asset Valuation

Effective Date:

July 1, 1998

Fixed assets of the state are to be valued according to the following criteria:

3.2.1.2.1.a

Donated Assets - For those assets acquired by gift, donation, or payment of a nominal sum which is not reflective of the asset's true market value, the cost assigned is to be the fair market value at time of acquisition plus all appropriate ancillary costs. If the fair market value is not practicably determinable due to lack of sufficient records, estimated cost is to be used.

3.2.1.2.1.b

Purchased Assets - Valuation of purchased assets is to be made on the basis of historical costs including all nonrefundable purchase taxes (e.g., sales taxes), and all appropriate ancillary costs less any trade discounts or rebates. If the historical cost is not practicably determinable, then estimated cost is to be used.

The cost of extended maintenance/warranty contracts is included in the valuation of the fixed asset provided the contract is purchased at the same time (or soon thereafter) as the fixed asset. These contracts are depreciated over the useful life of the asset. Payments for contracts not purchased at the same time as the fixed asset are not to be capitalized.

3.2.1.2.1.c

Self-Constructed Assets - When an agency constructs an asset for its own use, the following policy is to govern the valuation of the asset:

All direct costs associated with the construction are to be included.

Agency project management costs may be capitalized directly, when practicably discernible and directly associated with the project, or through the application of a percentage of total budgeted project costs. The application rate may or may not be designed to recover total agency project management costs. Indirect costs are to be excluded unless they are increased by the construction. (Refer to the OFM Capital Plan instructions for discussion of maximum percentage limitations.)

In proprietary and similar trust fund type accounts, interest costs (if material) incurred during the period of construction should be included in the capitalized cost of the asset. In governmental and expendable trust fund type accounts, prior written approval is required from the Accounting Division of OFM, to capitalize, as a cost of the asset, interest costs incurred during the period of construction.


3.2.1.2.2	Identification Policy	Effective Date:	July 1, 1998

Upon receipt and acceptance, all inventoriable fixed assets of the state are to be marked in such a manner as to identify that the property belongs to the state of Washington and to the responsible agency. Refer to Subsection 3.2.2.4 of this manual for the specific marking standards applicable to state owned equipment.

3.2.1.2.3

Capitalization Policy

Effective Date:

July 1, 1998

	All land acquisition, regardless of cost (including ancillary costs), is to be capitalized. All other fixed assets with a unit cost (including ancillary costs) of $5,000 or greater are to be capitalized unless otherwise noted. For governmental and expendable trust fund type accounts, asset capitalization is to be recorded in the General Fixed Asset Account Group. For proprietary and similar trust fund type accounts, the value of the asset is to be recorded in the account itself. (Also refer to Subsection 2.2.4.6.) Only capitalized fixed assets are to be considered reportable for financial statement purposes.
3.2.1.2.3.a	New acquisitions - Fixed assets which have no relationship to the addition or improvement to, or the repair or replacement of a component of, existing fixed assets; and meet the $5,000 threshold stated above are to be capitalized.
3.2.1.2.3.b	Extraordinary repairs, betterments, or improvements - Outlays that increase future benefits from an existing fixed asset beyond its previously assessed standard of performance are to be capitalized if they cost $5,000 or more. Increased future benefits typically include: An extension in the estimated useful life of the asset. An increase in the capacity of an existing fixed asset. A substantial improvement in the quality of output or a reduction in previously assessed operating costs.
3.2.1.2.3.c	Replacement - Acquisition of a fixed asset to replace a part of another fixed asset is capitalized when the cost of the replacement is $5,000 or more and equal to at least the lesser of 10 percent of replacement value of the asset or $100,000. Example: A $9,000 replacement of a heating boiler (which did not meet any of the criteria listed in the previous paragraph) in a building having a replacement value of $120,000 would not be capitalized. The cost, in this case, is not equal or greater than 10 percent of the building's replacement value. Had the building's replacement value been less than $90,000, the $9,000 boiler replacement would have been capitalized. EXCEPTIONS to this policy are: Replacement roof coverings are not capitalized (whether or not the replacement is with superior materials) unless the replacement extends the useful life of the building. Replacement floor coverings and window coverings are not capitalized. Costs to remodel (convert) a building to a different use, where the remodeling does not extend the useful life of the structure itself, are not capitalized. The cost and accumulated depreciation of the replaced fixed asset are to be removed from the accounting records if the amounts are determinable and the replacement is capitalized. For proprietary and similar trust fund type accounts, the removed amounts are offset by entries to Revenue Source Code 0418 "Gain or Loss on Sale of Fixed Assets."
3.2.1.2.3.d	Addition - A $5,000 or more expansion of or extension to an existing capitalized fixed asset is capitalized.
3.2.1.2.3.e	Bulk Purchase - For proprietary fund type accounts, bulk purchases of like fixed assets with unit costs of less than $5,000 may be capitalized as a group where the allocation of costs for the bulk assets over time is matched to the corresponding revenue generated by the bulk assets.

3.2.1.2.4

Capital Leases

Effective Date:

July 1, 1998

3.2.1.2.4.a	A capital lease is a lease that transfers substantially all the benefits and risks inherent in the ownership of property to the state. A lease must meet one or more of the following four criteria to qualify as a capital lease: By the end of the lease term, ownership of the leased property is transferred to the state; or The lease contains a bargain purchase option; or The lease term is equal to 75 percent or more of the estimated useful life of the leased property; or The lease qualifies as a capital lease if, at the inception of the lease, the present value of the minimum lease payments, excluding executory costs (usually insurance, maintenance, and taxes paid in connection with the leased property, including any profit thereof) is 90 percent or more of the fair value of the leased property. The interest rate to be used in the computation of the present value is available by contacting the Debt Management Division of the Office of the State Treasurer (OST), and is the rate in effect at the execution date of the lease.
3.2.1.2.4.b	Capital leases with a net present value of the future minimum lease payments or fair value, whichever is less, of $10,000 or more are to be accounted for as an acquisition of a capitalized asset and the incurrence of a liability. If such a lease involves the acquisition of more than one asset, each asset is to be considered capitalizable if its fair value is $5,000 or more. Capital leases with a net present value of less than $10,000 are to be accounted for as operating leases. (Also refer to Subsections 2.2.4.6.7 and 2.2.5.2.3.) If title to these assets transfers to the state at the conclusion of the operating lease, at title transfer they are to be capitalized and/or inventoried pursuant to Subsections 3.2.1.2.3 and 3.2.1.2.7.
3.2.1.2.4.c	Capital leases between state agencies with a net present value or fair value, whichever is less, of $10,000 or more are to be recorded as follows: The lessor agency is to treat the lease as a sales type lease (record a sale and remove the asset from its fixed asset inventory). The lessee agency is to treat the lease as a capital lease (record the acquisition of a capitalized fixed asset).
3.2.1.2.4.d	Capital leases are to be used only to acquire assets considered capitalizable. (Refer to Subsection 3.2.1.2.3.)

3.2.1.2.5

Fixed Assets Acquired Through Certificates of Participation

Effective Date:

July 1, 1998

Fixed assets acquired through OST’s Certificate of Participation (COP) program are capitalized in accordance with the state’s capitalization policy. (Also refer to Subsections 2.2.4.6.8 and 2.2.5.2.4.)

3.2.1.2.6

Depreciation Policy

Effective Date:

July 1, 1998

3.2.1.2.6.a	Depreciation is to be calculated and recorded for all capitalized fixed assets with the exception of land, construction in progress, and library resources, museum and art collections. Depreciation is to be calculated, using the straight-line method:
	Annual Depreciation =	Cost - Salvage Value
			Asset Useful Life
3.2.1.2.6.b	Schedule A, Fixed Asset Commodity Class Code List and Useful Life Schedule, in Section 3.2.3.1.1, is a table of standard estimated useful lives for fixed assets acquired in new condition.
3.2.1.2.6.c	Agencies are responsible for establishing and utilizing an appropriate useful life for assets acquired in less than new condition.
3.2.1.2.6.d	General Fixed Assets - The useful life shown in Schedule A is required for fixed assets acquired in new condition. However, in rare circumstances, agencies may request a deviation in useful life from Schedule A (for fixed assets acquired in new condition). The request is to be in writing and requires prior written approval from the Accounting Division of OFM.
3.2.1.2.6.e	Fund Fixed Assets - Use of estimated useful life in Schedule A is optional. A shorter or longer estimated life may be used depending on factual circumstances, replacement policies, or industry practices. Proposed deviation in useful life from Schedule A (for fixed assets acquired in new condition) requires prior written approval from the Accounting Division of OFM.

3.2.1.2.7

Inventory Policy

Effective Date:

July 1, 1998

3.2.1.2.7.a	The following fixed assets are to be considered inventoriable assets and carried on the property records of an agency:
	Land.
	Fixed assets with a unit cost (including sales tax and ancillary costs) of $5,000 or greater, unless otherwise noted.
	Fixed assets identified as small and attractive (refer to Subsection 3.2.1.1.5.k).
3.2.1.2.7.b	Agencies are responsible for developing internal policies and procedures to protect and control the use of all inventoriable fixed assets. Agencies are to consider costs vs. benefits in developing their individual policies and procedures.
3.2.1.2.7.c	Artifacts and library resources, including books, films, documents, or other audiovisual material, which are under the control of a recognized cataloging system, are to be recorded on the property records of the agency as a single item. Primary control of this type of asset is to be maintained through the cataloging system.

3.2.1.2.8

Small and Attractive Assets

Effective Date:

July 1, 1998

	Agencies are to develop written internal policies, including a risk assessment, defining small and attractive assets and specifying control measures applicable to these assets. At a minimum, agencies are to include all assets which are classified under commodity major group 10XX "Weapons, Firearms, Signal Guns, and Accessories." Absent a risk assessment and development of written policies for identifying and controlling small and attractive assets, agencies are to define, at a minimum, the following assets with unit costs exceeding $300 as small and attractive:
	5822	Communications Equipment, Public Safety: Audio and video
	6651	Optical Devices, Binoculars, Telescopes, Infrared Viewers, and Rangefinders
	6710-6730	Cameras and Photographic Projection Equipment
	7012-7013	Microcomputer Systems, Laptop and Notebook Computers
	7034-7039	Other IT Accessorial Equipment and Components (Scanners, Data Displays, etc.)
	7420-7450	Office Equipment
	7730	Record Players, Radios, Television Sets, Tape Recorders, VCRs, and Video Cameras, Home Type

3.2.1.2.9

Infrastructure

Effective Date:

July 1, 1998

3.2.1.2.9.a	Infrastructure includes public domain general fixed assets that are immovable and of value only to the state. Such assets normally do not impact the value of the land on which they are located. Infrastructure includes certain improvements other than buildings such as roads, bridges, curbs, gutters, streets, sidewalks, drainage systems, lighting systems, and similar assets. All land and improvements within the operating right-of-way of the state’s transportation system are considered infrastructure.
3.2.1.2.9.b	When streets, sidewalks, lighting systems, and other similar fixed assets are located in a confined setting such as a campus, park, or compound and they meet the state’s capitalization policy, they are capitalized and inventoried under the classification of Improvements Other than Buildings (refer to Commodity Class Code List Subsection 3.2.3.1.1). However, such fixed assets considered to be historical may be excluded from capitalization with prior written approval from the Accounting Division of OFM.
3.2.1.2.9.c	Fixed assets classified as infrastructure are to be inventoried in memorandum form on the agency’s property records for control purposes only and are not to be capitalized.

3.2.1.2.10

Records Requirements

Effective Date:

July 1, 1998

3.2.1.2.10.a	Agencies are to maintain a fixed asset system which includes records for all inventoriable assets.
3.2.1.2.10.b	For capitalized fixed assets, agencies are to utilize the Capital Asset Management System (CAMS) operated by the OFM Accounting Division or may use an alternate in-house system with the approval of OFM.
3.2.1.2.10.c	Agency fixed asset record systems are to contain, at a minimum where applicable, the following data elements (items 6, 15, 17, and 19 are not applicable to small and attractive assets):
3.2.1.2.10.c(1)	Agency Name and Code Number - The agency name and three digit agency code number.
3.2.1.2.10.c(2)	Account - For proprietary and similar trust fund type accounts, this is the account in which the asset is being utilized. This may or may not be the original purchasing account. For governmental and expendable trust fund type accounts, this is the account which originally purchased the asset. For those assets acquired prior to July 1, 1982, for which an account cannot be identified or is no longer in existence, such assets are to be identified as assets of the General Fund - Basic Account.
3.2.1.2.10.c(3)	Acquisition Date - The date the agency takes title to, or assumes responsibility for, an asset.
3.2.1.2.10.c(4)	Commodity Code - The code assigned to a fixed asset which correlates to a descriptive title. Refer to Schedule A at Subsection 3.2.3.1.1 for the Fixed Asset Commodity Class Code List and Useful Life Schedule to be used.
3.2.1.2.10.c(5)	Cost - The total cost (value) assigned to the asset. Refer to Subsection 3.2.1.2.1 for clarification.
3.2.1.2.10.c(6)	Depreciation - The portion of the cost of a fixed asset representing the expiration in the service life of the asset attributable to wear and tear, deterioration, action of the physical elements, inadequacy and/or obsolescence which is charged systematically over the useful life of the fixed asset. Refer to Subsection 3.2.1.2.6.
3.2.1.2.10.c(7)	Description - Name of the asset.
3.2.1.2.10.c(8)	Disposal Authorization - When required, either the number assigned by the Department of Information Services (for information technology related equipment and proprietary software) or the Office of Commodity Redistribution, Department of General Administration (for all other fixed assets), granting an agency the authority to dispose of an asset or as provided by specific statutory authority. Refer to Subsection 3.2.1.2.12.
3.2.1.2.10.c(9)	Disposal Date - With proper authorization, the date that the agency officially relinquishes responsibility for the asset.
3.2.1.2.10.c(10)	Inventory Control Number - The control number inscribed on, or contained on the inventory tag attached or referring to, an asset.
3.2.1.2.10.c(11)	Location Code - The identification code of the county in which the asset is located. Refer to Schedule B at Subsection 3.2.3.1.2 for Location (County) Codes to be used.
3.2.1.2.10.c(12)	Manufacturer - The name of either the manufacturer or the commonly accepted trade name; if none, then vendor name.
3.2.1.2.10.c(13)	Order Number - The number of the purchasing document used for the acquisition of the asset.
3.2.1.2.10.c(14)	Ownership Status - An indication as to possible claims against the asset by outside parties (e.g., federal government).
3.2.1.2.10.c(15)	Parcel Location Identifier (For Land Only) - The county assessor's parcel number of the land, or other code used by the agency to specifically identify the location of the land. If a county where the state land is located does not employ a parcel numbering system for exempt land, an alternative numbering system is to be used.
3.2.1.2.10.c(16)	Quantity - The physical count of the inventoriable items. For equipment, this number is to be expressed as whole units; for buildings, as square feet; for land, in acres to the nearest tenth, except for tidelands and shorelands which are to be expressed in front footage; and for construction work in progress, as number of capital projects under construction.
3.2.1.2.10.c(17)	Salvage Value - The portion of a fixed asset’s cost that is recovered at the end of its service life less any disposal costs.
3.2.1.2.10.c(18)	Serial Number - The sequential identification number assigned by the manufacturer. Do not confuse this number with the model number.
3.2.1.2.10.c(19)	Useful Life - The estimated useful life of the fixed asset in years. Refer to Schedule A at Subsection 3.2.3.1.1 for the Fixed Asset Commodity Class Code List and Useful Life Schedule.

3.2.1.2.11

Physical Inventories

Effective Date:

July 1, 1998

3.2.1.2.11.a	Agencies are to initiate and document an inventory program to ensure that every inventoriable fixed asset is subject to a physical count or verification every two years.
3.2.1.2.11.b	For artifacts and library resources, a perpetual inventory shall be maintained through a recognized cataloging system. These assets are to be inventoried biennially if practical. If not, they are to be periodically sampled on a revolving basis or inventoried via accepted industry standards.
3.2.1.2.11.c	The fixed assets inventory is to be subject to verification by a person who is neither directly responsible (having custody and receipt/issue authority) for the assets nor supervised by the person responsible (refer to Subsection 3.2.2.3.2).
3.2.1.2.11.d	Agencies may conduct their fixed assets inventory on a revolving basis if the following conditions are met: Every item is subject to a physical count or verification every two years. The inventory program is documented and active.

3.2.1.2.12

Removal of Assets from Inventory

Effective Date:

July 1, 1998

3.2.1.2.12.a

Fixed assets are to be removed from active inventory based on the completion and approval of a Property Disposal Request (Form S.F. 267A or equivalent).

3.2.1.2.12.b

Agencies are to maintain records of fixed asset dispositions in accordance with approved agency records retention schedules.

3.2.1.2.12.c

When removing fixed assets from inventory, agencies are to follow policies and guidelines issued by:

The Information Services Board (Department of Information Services) for information technology related equipment and proprietary software (refer to RCW 43.105.041),

The Office of Commodity Redistribution, Department of General Administration, for all other fixed assets (refer to RCW 43.19.1919), or

Other specific statutory authority.

3.2.1.2.13

Assets Owned by, Or Residual Ownership Rights Retained by, External Entities

Effective Date:

July 1, 1998

For record keeping and reporting purposes, a distinction must be made between those assets for which the agency has absolute title and those assets for which residual title rights remain with an external entity, such as the federal government. Temporary custodial responsibility or title shall not be considered absolute for the purposes of this chapter. While only the value of property to which the agency has absolute title is included in the annual financial statements, all property that is inventoriable is to be included in the fixed asset inventory system, including assets on lease or long-term loan.

3.2.1.2.14

Assets in Use by Subtenant Agencies

Effective Date:

July 1, 1998

The ownership of and consequent responsibility for fixed assets acquired through a capital project rest with the funded agency. There are occasions, however, when authorizing legislation for a capital project provides fixed assets for more than one agency or for agencies other than the funded agency (appropriated). In such instances, the funded agency retains ownership of and responsibility for properly accounting and reporting for said assets. The funding agency, by agreement, may condition the use of such fixed assets by another (subtenant) agency including making the subtenant agency responsible for all reporting requirements for such fixed assets. Upon vacation of the agreement, all ownership rights and responsibilities revert to the funded agency.

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