Enabling works is a generic description for site preparation works needed to enable a specific piece of equipment to be installed.

• A Project code (Estates revenue), with an Estates approver, is set up for the enabling works and the I&E code used would be 9012 (capital equipment under construction) so that the costs all go to capital equipment from the start.
• The equipment would then be charged to a faculty activity code also usingthe I&E code 9012 (capital equipment under construction) and this would have a faculty approver. The costs would not be input to the register until the asset is commissioned.
• On commissioning, all of the costs on the Project code would be transferred to the faculty code using I&E 9011 (capital equipment). The costs of the equipment already on the faculty code on I&E 9012 would be transferred to I&E 9011. The Project code could be closed and the asset then input to the register.

Estates will require the oracle parent hierarchy code in order to set up the enabling works as a project within their internal project management system. This can often be referred to by Estates as a “source of funds” and should not be confused with the oracle source of funds.

The timely commissioning of capital equipment is essential for 2 reasons:

1. To ensure that the income for funded equipment is recognised in a timely manner following commissioning
2. So that depreciation commences from the date of commissioning

Projects Managers / Principal Investigators are placed with the responsibility in providing supporting data on commissioning an asset.

This includes ensuring completion certification, operational dates and asset component forms are submitted to Capital Finance / Faculty Finance.

It is essential that faculties/areas ensure that as soon as a piece of equipment is commissioned they input a journal to transfer the costs from the un-commissioned I&E code to the commissioned I&E code. For equipment including enabling (Estates works charged to a Project code), Estates Finance must ensure that as soon as the ‘enabling’ works are complete the costs are transferred from the Project code to the appropriate faculty area code. The journals should be input per below:

CR Asset cost – un-commissioned

(I&E’s 9012 Equipment, 9017 Plant & Machinery, 9022 Fixtures & Fittings, 9048 Software)

DR Asset cost – commissioned

(I&E’s 9011 Equipment, 9016 Plant & Machinery, 9021 Fixtures & Fittings, 9047 Software)

The journal MUST contain sufficient detail to enable the fixed asset register to be fully updated and so that the income recognition process can be undertaken. The journal narrative, as a minimum, must contain the following:

• User ID – to identify who has input the journal
• Equipment description (as detailed as possible)
• Purchase order number
• Date of commissioning

Any brief narratives e.g. Transfer of equipment from UC to commissioned, are not acceptable.

Any delays in updating commissioned assets could have a significant impact on the month end accounts, primarily for income recognition, but also with regards deprecation.

In general expenditure over £150k on new buildings or enhancements to existing buildings would be classed as capital. If the spend is classified as capital a business case may be required (please contact the Central Finance Team for details) and a Capital Equipment Information Form (Land and Buildings) will need to be completed.

The timely commissioning of capital building works, i.e. new build or refurbishment, is important for two reasons:

1. So that depreciation commences from the date of commissioning
2. To ensure that any income on funded building projects, with performance related conditions (PRC’s), is recognised in a timely manner following such conditions being met i.e. commissioning

The commissioning of buildings comes via a Practical Completion Certificate (PCC) and the completion of a component accounting template. The PCC is a certificate of primary completion of work, subject to a period to snagging. Once all snagging has been resolved any previously held retention’s are released. The PCC’s are generally issued by the contractor working on the project and are passed to the Project Manager for the particular project. The project manager through the use of QS information should at this point complete the component split.The Project Managers then send the PCC and component split to the Estates Finance Team who then forward to the Central Capital Team.

Prior to commissioning the costs relating to the project would be charged to an un-commissioned I&E code and then following receipt of the PCC, the Estates Finance Team would journal the costs to the commissioned I&E code. The journals should be input per below:

CR Asset cost – un-commissioned (I&E’s 9009 new build or 9052 refurbishment)

DR Asset cost – commissioned (I&E’s 9001 new build or 9051 refurbishment)

The PCC details the date at which the project was practically complete. This is the date that is used as the commissioning date within the L&B fixed asset register. Depreciation on the building will then commence from the date of commissioning to the end of the appropriate useful life for the various components i.e. new build – structure 100 years, refurbishment - structure 50 years.

Any delays in updating commissioned assets could have a significant impact on the month end accounts, primarily with regards deprecation.

Also, please updated paragraph to read as (whilst ensure the Newly Donated Assets Form is hyperlinked to the actual form attached):

When a capital asset is donated please inform the capital team, whilst also completing Newly Donated Assets Form The Head of School Finance, in each school, is responsible for ensuring that procedures are in place, within their school, to ensure that any donated assets over Capital Threshold Value (£>50k Heritage or >£100k Equipment/Software) are identified, prior to, or as soon as the asset is received.

Guidance on accounting for donated assets can be found in the Accountant's Handbook which can be found on the shared drive here - G: Finance General\Handbook 

When a capital asset is disposed of (inc sale, part exchange, end of useful life, broken) please inform the capital team. 

Authorisations required for disposals;

In both circumstances an equipment Disposal form should be submitted to the Capital Finance team for authorisation and so that the Central Register can be amended.

A copy of the invoice or sale agreement identifying any sale proceeds must be retained and for externally funded assets. A copy of the funding body’s approval for the treatment/retention of the sale proceeds must also be obtained.

Description

This process is undertaken each month after the FAR is updated for the month-end processes. A list of capital equipment with value equal or greater than £100k will be prepared by the Capital Finance Office. The list will be sent to Faculty Capital Leads and other areas as necessary with a deadline, which is two weeks from the date of the list being sent. The Capital Leads will arrange for assets on the list to be physical verified. Confirmation or updates of the verification will be sent to the Capital Finance Officer by the given deadline. The FAR will be updated by the Capital Finance Officer accordingly.

Inputs

• List of capital asset with value equal or greater than £100k but have yet to be verified
• Updated FAR

Outputs

• Confirmation of receipt of the capital asset
• Verification updates for any outstanding asset from the list
• Required adjustment for any undelivered assets from the list

Criteria

• Asset must have value equal £100k or above
• Asset must be delivered from the supplier
• The list of capital asset will have the following details included:
  • Faculty
  • School
  • Asset number
  • Commissioning date as provided
  • Name of Equipment / Make and Model
  • Order/Journal number
  • Description
  • Location
  • Technical Owner
  • Academic Owner
  • Cost Total

An annual process to verify all equipment and review for any impairment is undertaken between May-July.

The fundamental objective of depreciation is to reflect in operating profit the cost of use of the tangible fixed assets (i.e. the amount of economic benefits consumed by the entity) in the period. Therefore, the depreciation amount of a tangible fixed asset should be recognised in the statement of consolidated income on a systematic basis in order that it reflects as fairly as possible the pattern in which the asset’s economic benefits are consumed by the entity, over its useful economic life.

Where the tangible fixed asset comprises two or more major components with substantially different useful economic lives, each component should be accounted for separately for depreciation purposes and depreciated over its individual economic life.

The useful economic life of a tangible fixed asset and its residual value (based on the price level that existed when the asset was purchased or last revalued) should be reviewed at the end of each reporting period.

Expected Useful Economic Lives

• Land and buildings
  • Land is not depreciated
  • Leasehold buildings are depreciated over the life of lease
  • UELs vary depending on the build and component

• Motor vehicles and general equipment over £100k are depreciated over 3 years
• Equipment for specific research projects over £100k are depreciated over the life of the grant or by default 3 years.

The University does not normally make payments in advance for goods or services. However, certain circumstances may require such payments. Examples when such payments may be made include:

• Complex items of equipment that have to be individually made or adapted, where the supplier requires payment in advance; or
• The terms and conditions imposed by a funding body require expenditure by a particular date, but delivery is not possible within that deadline.

Payment in advance of delivery shall only take place if all the following conditions are met:

1. The Head of School and the Head of Faculty Finance have both approved the payment in advance; and
2. All University and EU requirements on competitive tendering have been met; and
3. A requisition and purchase order have been authorised and issued

For all payments in advance of delivery exceeding £25,000 (excluding VAT), in addition to the rules above:

• A suitable guarantee must be obtained, ensuring that the University will be protected if the supplier fails to deliver on the contract or goes out of business; and
• The Faculty Dean and the Chief Financial Officer (who may delegate this role to the Head of Procurement) must approve the arrangements in advance.

For further information please see the Invoice Payment page.

Income recognition for capital income takes place when the asset is capitalised (assuming there is a PRC to build the asset).

In the month of capitalisation, in most cases for equipment, the whole of any external income relating to the asset is recognised in that month.

The recognition of income relating to equipment is performed by the Faculty/Area concerned (and should be equal to the value of the commissioned cost adjustment in the month).

Income recognition entries (R and P Codes) must be on the correct SOF (source of funds):

Dr Revenue income (e.g. IE 1207)

Cr Capital income (e.g. IE 1206)

In terms of month end process, all capital income adjustment must be done prior to the centrally run external grant funded income accrual/deferral process.

In the following months depreciation will be charged with no matched income.

Income related to buildings will be recognised according to the contract. Speak to the capital team for advice.

Where there is an incident of damage to capital assets the central capital team need to be informed so that registers can be updated accordingly. Dependant on the level of damage the incident may lead to costs and potential insurance claims.

Two procedures are available to help staff act accordingly when an incident occurs

1. Reporting of Incidents of Damage to Capital Assets - This is a general overview of the process to follow when incidents of damage to assets of value greater than £10k occur.
2. Insurance Process Guidance for Finance - This is specific guidance for finance staff to detail how to account for incidents of damage to capital assets.

A template is available for recording all costs.