Equipment Coding and Valuation
Correctly coding and valuating equipment from the beginning is important because the codesand values affect so many activities in the life cycle of your equipment. If equipment codes are incorrect, you may have difficulties processing a new acquisition in FABweb, conducting the biennial inventory for your unit, or responding to auditors' questions.
Equipment Account Codes
When purchasing equipment, it is critical that you use the correct equipment account code. Not only do account codes categorize equipment by cost and type, but equipment account codes generate the Otag record in Banner. To correctly value equipment, any costs associated with getting the new equipment to campus and getting it operational should be considered in the final cost of the new equipment. This would include installation costs, freight, transit insurance, initial inspection, trade-in credits, testing, and training. These costs need to be account coded in the overall cost of the purchase to an equipment account code 127* or 163*.
-
Trade-In of old equipment: For any trade-in of like-kind equipment, consider the vendor trade-in allowance that will be added to the value of the equipment to select the correct account code.
-
Training for new equipment: If the training included on the invoice is not required to put the equipment into service, it should not be added to the original cost of the equipment and coded to a 147-account code. Training expenses for end users that is not required for initial use of the equipment should not be included in the cost of the equipment.
Do not include finance charges, AppleCare, warranty expenses, or maintenance contracts in the cost valuation of the equipment as these items should be individually expensed to an appropriate non-equipment account code.
If an incorrect account code is used, Banner will not create an Otag record, and the new acquisition will not show up in the unit’s FABweb inbox. Below are the equipment account code ranges that will generate an Otag:
| Otag Code |
Range |
Note |
| 127* |
$2,500 - $4,999.99 |
controlled but not capitalized equipment |
| 163* |
$5,000 and greater |
controlled and capitalized equipment. |
Account codes starting with 121, 122, 124 and 126 do not generate Otag records.
If an incorrect account code is assigned to an item, it can affect the reconciling of your unit's monthly operating ledger, as well as your biennial inventory. To correct account codes, process a journal voucher in Banner. If you have questions about equipment account codes, contact University Property Accounting and Reporting (UPAR).
Types of Codes
Account Code
An account code categorizes equipment by cost and type. If you do not enter an equipment account code when an item is purchased, there will be no skeletal record in FABweb and Banner Fixed Assets. In addition, equipment without a code will not be capitalized correctly. Capitalizing equipment is an important part of our total financial picture. You must submit a Journal Voucher form to correct an incorrect account code.
Commodity Code
Categorizes equipment for reporting purposes; used to assign a useful life to an item for depreciation. If an item's commodity code is incorrect, that item will not be classified or depreciated correctly.
Location Code
Identifies the university, building, and room where a piece of equipment can be found. If even the room information is missing or incorrect it will adversely affect the Facilities and Administrative (F & A) rate, the overhead we charge to all grants for using our facilities. In addition, your biennial inventory will be more difficult to complete because you will not know where to look for the item.
Condition Code
Indicates the use status of a fixed asset, such as whether it is being used by the unit or is on loan to an employee. If an item's condition code is incorrect, it will adversely affect the Facilities and Administrative (F & A) rate, the overhead we charge to all grants for using our facilities.
Entity Code
Identifies the type of self-supporting activity, or "entity" for which a piece of equipment is currently used. If an entity code is incorrect, you will have to submit an Entity Code Change Request form to correct it.
Importance of Capitalizing
Capitalization means to classify the cost of an item as a long-term investment because that item will be used over a period of time. Therefore, that item's cost is not charged against the earnings of one fiscal year as part of the cost of day-to-day operations. Instead, it is charged over several fiscal years. Because the item is worth less in each succeeding fiscal year, the amount that is charged each year is depreciated. Depreciation reflects the reduction in the value of the item due to obsolescence and wear and tear. University Property Accounting and Reporting calculates capitalization and depreciation for you each year, so you do not have to perform that function. Accurate capitalization and depreciation are important because they are part of maintaining accurate records about U of I System equipment and property.
The system maintains accurate property records because:
- It's system policy and state law (Illinois Property Control Act).
- It's required under the Government Accounting Standards Board (GASB) and Financial Accounting Standards Board (FASB).
- Equipment records are part of the system overhead which is used in calculating the Facilities and Administrative (F & A) rate, the indirect cost we charge sponsored projects. If our calculation is wrong, it could cost the system money.
- Property records are part of University financial statements which affect our ability to raise money because the statements are used to calculate our credit score which in turn affects our bond rating.
By following consistent accounting principles from GASB and FASB, it is possible to perform financial analysis comparing one unit to another and our University of Illinois System to other universities. It helps us determine our general financial health.
If your unit remodels, renovates, or performs maintenance that is over $250,000, the cost may be subject to capitalization. Consult Capitalized Construction Projects.
If your unit purchases or develops an intangible asset, the cost may be subject to capitalization. Consult with University Property Accounting for the correct account code.