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MEMORANDUM <br />Date: <br />6/23/2006 <br />To: <br />'Lacey Risdal, PWM <br />Cc: <br />Kandy Hanes, Fleet . <br />From: <br />Andrea Jobanek, F/R <br />RE: Policy for Capitalization of Fleet Equipment Modification Costs <br />BACKGROUND Fleet needs to record all costs associated with equipment assets to the <br />replacement fund (616), in order to get total equipment replacement costs. Each year, the Fleet <br />staff makes modifications (mods) to several pieces of equipment. Occasionally, these mods have <br />modest costs, and relate to assets purchased in a prior FY. <br />F/R capitalizes all applicable current year equipment costs over $5,000. These costs include any <br />CY component parts purchased (lift gates, etc),. for these pieces of equipment. The annual <br />process to update the asset management (AM) system is time consuming. To facilitate this, I need <br />detailed purchase information (PO #, equipment #, description, acquisition date, cost, etc) for each <br />asset. <br />Taking into consideration the needs of both Fleet and F/R i have come up with the following <br />recommendation. <br />CAPITALIZATION POLICY (mods and upfits) <br />Financial Reporting will capitalize all .Upfit and Modification costs, ass iat with capMiz ed <br />(no-001" i6 ` purchasedan the iTr ent-fscal veer with' >a dollaryplue of at least $1,QQt per <br />piece ofi+equprnent. In order to accomplish this, the backup fo`r the journal entry that moves these <br />costs from 619,IQ 13 to 6. T11»4 will need to have the following information: . <br />Equipment #, asset #, PO # (of CY asset purchased), asset.acquisition date, and modification cost. <br />When preparing the journal entry, please include one journal line for each purchase order # (PO# <br />s/b entered in the Line Reference field). This will enable me to associate the modification costs. <br />with the appropriate piece of equipment when adding the costs to AM. <br />I recommend that Upfit and fallodificatior} costs:#harare not associated with CY asset acquisitions, <br />or li,at Ao, ,� t meet the $1,000 threshold, be recorded:;in 616- 9464 = 6.3413 <br />I realize that in a perfect world, the Fleet subsidiary'and the F/R asset management system should <br />have the same equipment costs recorded, although the cost difference, that will arise from not <br />capitalizing some of these costs, will be immaterial to the fund for financial reporting purposes. <br />Based on this policy I will be reversing the 616 - 9464 -71100 portion of JE0000053402 and <br />processing a new journal with $48,516.57 to 616- 9464 -74100 and the remainder. of $86,733.98 to <br />616- 9464- 63413. <br />