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Asset Capitalisation Guideline

Section 1 - Purpose

(1) This guideline ensures the cost of assets are correctly and accurately recorded in the Asset Register and reported in the General Ledger.

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Section 2 - Authority

(2) Authority for this document is established by the Asset Management Procedure.

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Section 3 - Scope

(3) This guideline applies to the capitalisation of all assets (tangible and intangible) by RMIT University and its controlled entities, including all:

  1. property, plant and equipment purchased, constructed or developed with RMIT resources, irrespective of source of funds that are owned and controlled by the respective entity
  2. property, plant and equipment loaned to or donated by RMIT
  3. intangible assets, excluding intellectual property rights.
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Section 4 - Guideline

Treatment of Expenditure Associated With Property Projects

(4) Table 1: Guidance for determining the treatment of costs at each stage of property projects.

Project stage/phase, other details
Activity/cost item description
Expenditure type
Preliminary (initial investigation, scoping and feasibility)
Project scoping tasks:
  1. Formulating and evaluating alternatives, feasibility studies
  2. Design and documentation including tender drawings and documents
  3. Business case analysis and project planning
  4. Relocation of existing clients and staff members
Operating
Construction stage
  1. Detailed design and specification
  2. Obtaining planning and building permits
  3. Project management costs of externally appointed Project Managers directly attributable to the project
  4. Fit-out costs (excluding any items that are furniture or equipment items that must be capitalised separately)
  5. Remedial work unto of warranty period
Capital
Contamination of buildings or land related to capital projects for existing or new buildings
Various contaminations including but not limited to lead paint found on large capital projects during preliminary investigation or once the project has started
Capital
Contamination found during maintenance work
Various contaminations including but not limited to lead paint found on large capital projects during preliminary investigation or once the project has started
Operating
Post-construction phase
  1. Removalist costs to relocate tenants back to the building
  2. Ongoing maintenance costs
Operating

(5) In instances where the need for decontamination expenditure has been identified but not yet incurred, the Project Manager must contact central Financial Operations to determine future treatment of such expenses as the obligations may need to be disclosed in the Annual Report as a Provision or a Contingent Liability.

Treatment of Expenditure Associated With Software Projects

(6) Table 2: Guidance for determining the treatment of costs associated with internally developed software projects.

Project stage/phase, other details
Activity/cost item description
Expenditure type
Initiation stage (scoping, evaluation and business case)
Project scoping tasks:
  1. Conceptual formulation of alternatives, evaluation of alternatives, determination of the existence of the necessary technology
  2. Technology evaluation
  3. Selection of alternatives
  4. Business case analysis and the management and planning functions for the project
  5. Developing standards and architectural designs
Operating (these costs do not enhance the service potential or functionality of the software)
Analysis, design and development
Detailed analysis of user requirements:
  1. Detailed design and specification
  2. Software development configuration and interfaces including staff costs and contractor/consultant fees. Employee costs can only be capitalised as part of an intangible asset if such expenses are directly attributable to bringing the asset to its working conditions.
  3. Coding
  4. Installation of software
Capital
Testing, production and implementation
  1. Testing including parallel processing phase up to the point where the system is live at the first site only if implementation at subsequent sites does not enhance the software functionality.
  2. Implementation of the softwar
Capital
Enhancement of existing applications, when significant enhancement criterion is met
Detailed design and specification:
  1. Software configuration
  2. Development of interfaces
  3. Coding
  4. Installation of software or hardware necessary to get the software ready for production use at the first site only if the implementation at subsequent sites does not enhance software functionality
  5. Testing
  6. Parallel processing
Capital
Recurring maintenance and infrastructure support, borrowing cost
Data conversion from old systems into the new system:
  1. Post-implementation review expenditure
  2. Training of staff in the use or administration of the software (training room set up, organising, delivering and, attending training, fees paid to vendor to attend a training course)
  3. Ongoing support and system administration expenditure
  4. Applications maintenance, including maintenance for software licences which includes provision for delivery of software upgrades
  5. Management of infrastructure resources and cost of infrastructure support
  6. Minor projects where an asset will be acquired or developed but the total expenditure will not exceed the threshold amount
Operating
Whole of project, multi-stage or other items
Software licences acquired to be configured for the new system:
  1. Software licences acquired specifically to develop system, if this software is not expected to be used for any other system development
  2. Software licences for tools that are expected to be used for a range of projects should be accessed individually and recorded on the appropriate asset register
  3. Travel costs directly related to the development and implementation of the IT system
  4. Development of system-specific training material that would be considered part of the asset to be developed and delivered for ongoing business use
Capital
Whole of project, multi-stage or other items
  1. Training staff in the use of the project specific tools required to build or configure the software or hardware
  2. Installation costs at secondary or subsequent sites unless the subsequent implementations require additional analysis, design and configuration to meet slightly different business requirements
  3. Any vendor support costs
  4. Lease costs for IT hardware (which include leases costs for PCs used by the team and lease costs of the servers/midrange/mainframe and network infrastructure)
  5. Ongoing programming support to correct defects or cater for changes in legislation or modified business rules that do not constitute a significant enhancement to the software
  6. Internal business costs that are difficult to separately identify (i.e. cost of user’s time spent assisting in the analysis of the business requirements that are not allocated directly to the project)
Operating

Final Capitalisation

(7) The Project capitalisation form must be provided to Financial Services when and only when the following criteria are met:

  1. all vendor invoices related to the project are paid
  2. asset is ready to use
  3. nominated date for depreciation start and estimated useful life advised.

Treatment of Expenditure Associated With General Capital Expenditure

(8) Table 3: Guidance for determining the treatment of costs associated with general capital expenditure.

Item type
Activity/cost item description
Expenditure type
Items which cannot be capitalised
  1. Training costs
  2. Warranty costs (including extended warranties)
  3. Maintenance and support costs
  4. Cost of introducing a new product or service (e.g. Advertising or promotional activities)
  5. Administration and general overhead costs
Operating
Items which can be capitalised
  1. Delivery and handling costs
  2. Customs
  3. Testing
  4. Installation and assembly costs
Capital