Acquiring and Capitalizing Real Property

Directive Statement

This directive establishes the proper methods of acquiring and capitalizing real property.  All construction costs are identified and tracked by Construction Accounting.  Once the project is completed, Construction Accounting will provide componentization information to Asset Management for recording the asset’s cost into the University’s Property Management System.  In accordance with statutory provisions and Generally Accepted Accounting Principles (GAAP), the University will capitalize and include in its real property records the following:

For construction projects beginning on or after July 1st, 2008:

1. All land purchases, donations, exchanges, etc.
2. The original cost to construct new buildings
3. The costs related to renovation projects which adds new square footage
4. The costs to a renovation project which extends the useful life of a COMPONENT part (i.e. roof, plumbing, electrical, etc.) of the building by two or more years, and meets one or both of the following criteria:
   • The costs are $250,000 or more
   • The costs are 25% or more than the original cost of the building

For construction projects beginning on or before June 30th, 2008:

1. All new construction
2. Remodeling, renovation, and major repair projects with total cost of $100,000 or greater or 25% or more of the building value. Total cost will include all professional fees, contingencies, materials, etc. associated with the project. Purchases of tangible personal property (OCO) are not included in the evaluation of project costs for capitalization purposes
3. All land purchases, donations, exchanges, etc.
4. The Construction Accounting Department, with the approval of the Senior Associate Controller, may capitalize projects costing under $100,000 if a determination is made that the completion of the project will substantially extend the useful life or substantially improve the use of the building. In such instances, the costs of the project will be added to the real property records. Purchases of tangible personal property (OCO) are not included in the evaluation of project costs for capitalization purposes

Note:  Total costs include all professional fees, contingencies, materials, etc.  Excluded costs include tangible personal property and asbestos abatement costs.

Reason for Directive

To adhere to Generally Accepted Accounting Principles (GAAP) and other regulatory requirements.

Who must comply?

All University departments.

Procedures

New Construction and Renovations

All construction projects are managed by Planning, Design, Construction (PDC), Facilities Services (PPD), IFAS, or Housing.  While real property is being constructed, Construction Accounting works with project managers to ensure costs for the construction project are properly identified and tracked.

1. Each new construction and renovation project is assigned a project number in myUFL
2. All costs related to the project are tracked individually
3. At the end of the project, if the costs meet the capitalization threshold , the costs are capitalized to the related building and/or as infrastructure on the financial statements

Donations

Donations of buildings are done through the UF Foundation and/or the UF Research Foundation.

1. Send supporting documentation to Asset Management at PO Box 115300, 116 Elmore Hall
2. The real property is added to the Asset Management subsystem in myUFL and recorded as an asset on the financial statements

Leased Property

1. Send all lease agreements and amortization schedules to Asset Management at PO Box 115300, 116 Elmore Hall
2. Capital leases are property leases that include clauses stipulating:
   • The title of the building(s) will be transferred to the University of Florida
   • Where the lease term is greater than or equal to 75% of the property’s life
   • The value of the payments is greater than or equal to 90% of the fair market value of the property
3. Asset Management will research whether the lease qualifies as a capital lease
4. All capital leases are added to the Asset Management subsystem in myUFL and recorded as an asset on the University of Florida’s financial statements

Leasehold Improvements

Whether or not a lease qualifies as a capital lease, if a department makes improvements to a leased building, the costs are capitalized as a leasehold improvement as long as the improvements meet the capitalization threshold.  Projects will be managed by Facilities, IFAS, or Housing.

Last Reviewed

Last reviewed on 06/28/2024

Contacts

Asset Management: (352) 392-2556

Construction Accounting: (352) 392-5778

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