5.0 Capitalization Policy for Equipment


5.1 Capital Expenditure

5.1.1

Capital expenditure means the cost of the asset including the cost to put it in place. Capital expenditure for equipment means the net invoice price of the equipment, including the cost of any initial modifications, attachments, up to one year warranty, accessories, or auxiliary apparatus necessary to make it usable for the purpose for which it was acquired. It also includes the cost of incoming transportation incurred on shipments from external suppliers.

5.2 Equipment

5.2.1

Equipment means an article of non-expendable, tangible, personal property which stands alone, is complete in itself, does not lose its identity, and has a useful life of more than one year.

a. Capital Equipment

Those items of equipment which have an acquisition cost of $5,000 or more are capitalized. (F&A cost is not applied.)

b. Minor Equipment

Those items of equipment which have an acquisition of less than $5,000 are expensed. (F&A cost is applied.)

5.3 Component Parts

5.3.1

Enhancement parts with an acquisition cost of at least $2,000, which materially and permanently increase the value or useful life of a capital item, will be capitalized and their cost added to the capital cost of the item being enhanced; otherwise, they will be expensed. The purchase order or tag number of the enhanced capital item must be referenced on the requisition and purchase order for the enhancement part(s) in order for the enhancement part(s) to be considered capital.

5.3.2

Enhancement parts with an acquisition cost of at least $2000, which permanently increase the value of an item of minor equipment to $5,000 or greater and are acquired within 120 days of the acquisition date of the item of minor equipment, and which also permanently increases the useful life of the item, will have their cost added to the cost of the item of minor equipment being enhanced and both the enhancement part(s) and the item of minor equipment will be capitalized; otherwise, they will be expensed. The purchase order or the tag number of the enhanced item of minor equipment must be referenced on the requisition and purchase order for the enhancement part(s) in order for the minor equipment item and the enhancement part(s) to be considered capital.

5.3.3

Enhancement parts will not be capitalized, under any circumstances, if the enhanced item has neither been purchased by MIT nor given as a gift to MIT

5.3.4

Replacement parts, required to repair an item of capital or minor equipment and which simply maintain the original function of the equipment, will be expensed

5.4 Fabricated Items

5.4.1

A fabricated item will be capitalized if the cost of the material making up the fabrication is $5,000 or greater, the useful life of the item is more than one year, the item is MIT-owned or government funded, and the item is identifiable as a discrete item.

5.5 Deliverable End Item

5.5.1

This item is defined to include all equipment as well as electrical, electronic, and mechanical components, contractor-acquired and/or sponsor-furnished, which are being incorporated into a deliverable end item under the property terms of a contract/agreement, calling specifically to be constructed and delivered to formal addresses included in the contract/agreement. Deliverable end items are expensed.

5.6 Maintenance And Repair

5.6.1

Expenditures needed to maintain equipment in a proper operating condition or to restore equipment to a proper operating condition are expensed.

5.7 Software

5.7.1

All computer software, whether operating systems or applications, is expensed, except that the original operating system purchased with the computer is capitalized.

5.7.2

Software acquired, internally developed, or modified to meet the Institute internal needs, with no intention of marketing the software externally will be capitalized if the costs meet or exceed $250,000.