Please note: If your business has audited financial statements you may use this policy. If your business does not have audited financial statements you will need to replace the $5,000 amounts with $2500, since this is the maximum capitalization threshold allowed for businesses without audited financial statements.

Capitalization of Equipment

A. All tangible personal property with a useful life of more than one year and a unit acquisition cost of $5,000 or more will be capitalized and depreciated over its useful life using the straight-line method of deprecia¬tion. The Organization will expense the full acquisi¬tion cost of tangible personal property below these thresholds in the year of purchase.

B. The basis of accounting for depreciable fixed assets is acquisition cost, and all normal expenditures, including installation costs, architect-engineer fees, etc., of readying an asset for use will be capitalized. However, unnecessary expenditures that do not add to the utility of the asset will be charged to the period incurred.

Impairment of Long-Lived Assets

A recognized impairment of a long-lived asset will be reflect¬ed whenever events or circumstances warrant. For disclosure purposes, any recog¬nized impairment loss will be accompanied by a descrip¬tion of the impairment asset or group of assets and the measurement assumptions used in determining the impairment loss.

Accounting for the Costs of Computer Software for Internal Use

A. In conformance with SOP 98-1 the cost of developing computer software intended for internal use should be capitalized after both the following have occurred:

1. Management authorizes and commits to funding a computer software project

2. Conceptual formulation, evaluation and selection of possible software project alternatives have been completed.

B. Capitalizable costs include:

1. External direct costs of materials and services consumed in developing or obtaining internal-use computer software

2. Payroll and payroll-related costs for employees who are directly associated with the internal-use computer software project

3. Interest costs incurred while developing internal-use computer software.

The costs of data conversion from old to new system should be expensed.

C. Capitalization should occur when a computer software project is substantially complete and ready for its intended use.

D. The costs for developing the agency’s work site, including the cost of developing services that are offered to visitors (chat rooms, search engines, e-mail, calen¬dars, etc., shall be accounted for according to SOP 98-1.
Self-Constructed Fixed Assets

A. For all long-lived assets constructed by The Organization, the following costs will be capitalized:

1. All direct costs incurred specifically in the con¬struction of the fixed asset

2. Variable overhead and general and administrative costs

3. Interest costs that are material.

B. Fixed overhead costs will not be capitalized unless they are increased by the construction of the asset.

Capitalization of Software Development Costs for External or Internal Purposes

The cost of all developed software whether for external or internal purposes will be capitalized from the point of technological feasibility, specifically from the point of development of program specifications/beta-testable soft¬ware/resaleable/usable software.

Environmental Clean-Up Costs

The Organization is committed to complying with all Federal and state environmental laws.

Improvements and Betterments to Property, Plant and Equipment

Expenditures for significant improvements, replacements, betterments, additions, renovations and rehabilitations of existing proper¬ty, plant and equipment are capitalized at cost. The organization has engineering and construction staffs responsi¬ble for the majority of plant expansion projects and installa¬tion of machinery and equip¬ment. Capitalized costs of projects undertaken internally consist of direct materials, labor and allocated overhead and general and administrative expenses. Maintenance and repairs are expensed as incurred.

Property Insurance in Excess of Acquisition Cost

In the event that property insured in excess of acquisition cost is involuntarily converted, the new asset will be valued at the book value of the replaced asset plus or minus adjust-ments for differences between insurance proceeds and actual replacement costs.

Automated Data Processing Equipment

A lease-versus-payment analysis will be performed annually by The Organization for all automated data processing equip¬ment (ADPE) under an operating lease as defined in Statement of Financial Accounting Standard No. 13. A written justification statement will be prepared for all automatic data processing equipment under operating leases comparing the cost of leasing versus owning such equip¬ment.