AssetManagementProcedure

FinancePolicy

Purpose
Effective asset management and capital expenditure are essential to the continuity, development and growth of Victoria University of Wellington. They are closely linked to the goalsandstrategiesoftheUniversityanditsSchoolsandCentralServicesUnits(CSUs). Thepurposeofthis procedure istoensurethatcapitalexpenditurebytheUniversityisplanned, evaluated, authorised, implemented, monitored and reported in a systematic mannertomeet theobjectiveofbestpractice.

OrganisationalScope
ThisisaUniversitywideprocedureandshallapplytoallstaffmembersoftheUniversityand itssubsidiaries.

Definitions
Forpurposesofthisprocedure,unlessotherwisestated,thefollowingdefinitionsshallapply: InitialCost: Includes the assets purchase price plus any costs directly attributable to bringingtheassettothelocationandconditionnecessaryforittobecapable of operating in the manner intended. Directly attributable costs could include, but are not limited to, site preparation costs, initial delivery and handling costs, installation and assembly costs, asset testing costs, and professional fees. Initial cost does not include costs of advertising, conducting business and administration (e.g. staff training), other general overheads, or costofrelocatingorreorganising. Isdefinedastheperiodoverwhichanassetisexpectedtobeavailablefor usebytheUniversity.Itisdeterminedinrelationtoanentireassetcategory, asopposedtoanindividualassetand afterconsideringthefollowingfactors expected usage, physical wear and tear, technical or commercial obsolescence,legalorotherlimits. Is the amount for which an asset could be exchanged between knowledgeable,willingpartiesinanarmslengthtransaction?Wherethere isnomarketbasedevidenceoffairvalue(becauseofthespecialisednature oftheasset)depreciatedreplacementcostmaybeused.

UsefulLife:

FairValue:

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Computing Equipment:

Includesprinters,scanners,andplotters.
Note purchasing of small nonnetworked printers for individual machines is discouraged.Wheresuchprintersarerequired,ITSwillassesstheneedinthearea, andattemptto install a networked printer which will service the area and which ITScansupportcentrally.

Desktop Equipment: SpecifiedItem:

Includes all components of a personal computer unit and laptops i.e. the monitor, base unit, mouse, mouse pad, keyboard, speakers, and the standardapplication/operatingsoftware,cablesandfreight. Isanassetthatdoesntmeetthecapitalisationcriteriabutisrecordedasa fixed asset through the asset register because it is prone to accidental or deliberate loss due to its portability and attractiveness e.g. palm pilots, videos,cameras,televisionsandaudioequipment. Include costs incurred in the daytoday servicing of an asset, including labour,consumables,andthecostofsmallparts. Initialcostlessaccumulateddepreciationandanyaccumulatedimpairment losses. Wherethefairvalueofanassetcanbereliablymeasured,theassetmaybe carriedatarevaluedamount,beingitsfairvalueatthedateofrevaluation, lessanysubsequentaccumulateddepreciationandsubsequentimpairment losses. Revaluations shallbe made with sufficient regularityto ensure that the carrying amount does not differ materially from that which would be determinedusingfairvalueatthebalancesheetdate.Allrevaluationsmust beperformedbyanindependentvaluerorwheretheUniversityhasonits staffapersonsufficientlyexperiencedtoconductavaluation,bythatperson, so long as the valuation has been subject to review by an independent valuer. Isthehigherofitsfairvaluelesscoststosellanditsvalueinuse.Valuein use would usually be determined as the present value of future cash flow projections.
Note the University will be entitled to a Public Benefit Entity concession where valueinusecanbemeasuredatdepreciatedreplacementcost,asfutureeconomic benefitsarenotdirectlyrelatedtotheUniversitiesabilitytogeneratecashflows.

Repairsand Maintenance: CostModel: Revaluation Model:

Recoverable Amount:

4
4.1

ProcedureContent
BudgetingforCapitalExpenditure (a) All capital expenditure purchases must have an approved budget allocation before purchasecantakeplace(exceptexternallyfundedassets). (b) Urgentnonbudgetedpurchasesmaybeapproved throughaschoolfinancialadviseror, forCSUs,thefinancedepartment. (c) Majorcapitalexpenditurerequestsandprojectswithavalueof$100,000orgreaterwill requireacomprehensivebusinesscasetobepreparedbythesponsor. (d) Where a project is expected to span more than one year, forecast expenditure for subsequentyearsandmajormilestones willneed tobeprepared.
Note: For more information on budgeting for capital expenditure refer to the Capital ExpenditureBudgetGuide.

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(e) All purchases aretobe processedwithinthe Universitys approved procurementtools (iProcurement) and approved by a person with the required Financial Delegated Authority(refer tothe FinancialDelegatedAuthorities Policy). 4.2 4.2.1 Recognition CapitalisationCriteria (a) AnassetisclassedasafixedassetandrequiredtoberecordedontheUniversitiesfixed assetregisterwhenitmeetsallofthefollowingcriteria: (i) The GSTexclusive initial cost price of the asset exceeds the capitalisation threshold: (a) Initialcostpriceis greaterthan$2,000(GSTexclusive)
Note:Ifexternallyfundedasset,attachedtoaspecificresearchproject,thethreshold increasestogreaterthan$5,000)or

(b) Computingequipmentwithinitialcostpricegreaterthan$1,000(GSTexcl) or (c) Desktopequipment(anyvalue),ifpurchased,notleasedor (d) Theassetisanindividualworkofartor (e) Theassetisaspecifieditemand (ii) Theassethasanestimatedusefullifegreaterthan1yearand (iii) Theassethasnotbeenpurchasedwiththeintentionofresale. (b) Expenditure may be capitalised if it is expenditure on an existing asset and the expenditurewasincurredtoimprovetheassetsfunctionality,notmerelytoreinstateits futureeconomicbenefits(e.g.repairsandmaintenance). (c) Spare parts maybe capitalised where they meet the capitalisation threshold andthey areexpectedtobeusedovermorethanoneyear.
Note: Expenditure splitting in order to get below the capitalisation threshold ($2000) is not permitted.

4.3 4.3.1

Measurementafterrecognition Initialcostprice (a) Once it has been established that an asset meets the criteria for recognition, it is recordedontheUniversitysfixedassetregisteratcostprice(orcashpriceequivalentif purchased using deferred payment and/or foreign currency). Donated items are recordedattheirfairvalue. (b) Assets canbemeasuredas: (i) Individualassetsor (ii) A collection of related items or components that cannot operate in isolation, whose combined original cost exceeds the threshold (refer capitalisation thresholddefined insection 4.2.1(a))or (iii) An accessory which is required for permanent attachment to an existing capitalisedasset.Thecostoftheaccessoryistobeaddedtotheexistingassetifit meetsanyofthecapitalisationthresholdor

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(iv) Pooled assets of a similar type, whose combined cost exceeds the capitalisation threshold.Itemswhoseindividualvalueexceedsthethresholdmustbeseparately detailedinthefixedassetregisterandcannotformpartofapoolofassets. 4.3.2 Methodofmeasurement (a) Afterinitialrecognition,theUniversitymustchoosethecostmodelofmeasurementor therevaluationmodel.Themodelmustbeappliedacrossanentireclassofassets,and cannotdifferamongindividualassetsinaclass. (b) Revaluationsofclassesofassetsareconductedmorefrequentlyif,atbalancedate,the fairvalueoftheassetdiffersmateriallyfromthecarryingamount.Increasesinthevalue of assets are transferred to the asset revaluation reserve for that class of assets. A decrease in the value relating to a class of assets is recognised in the Statement of Financial Performance intheperiod it arises where it exceeds the increase previously recognised in the asset revaluation reserve. In subsequent periods, any revaluation surplus that reverses previous revaluation deficits is recognised as a credit to expenditureintheStatementofFinancialPerformanceuptoitsoriginalvalue. (c) Theapprovedmethodsofmeasurementbyclassofassetare: AssetClass Land BuildingStructures BuildingServices BuildingFitouts Infrastructureassets Leaseholdimprovements ComputingEquipment FinanceLeasedComputerEquipment ITSoftware Furniture&Equipment LibraryCollections Musicalequipment Vehicles MarineVessels Worksofart,classicalantiquities, heritagecollection,heritagemusical instruments,maraecarvings 4.4 Depreciation (a) Depreciation is charged on fixed assets to allocate the cost of the assets over their estimated useful lives. The depreciation charge for each period is recognised as an operatingexpenseandischargedtothebudgetcentrethatholdstheasset.Inthecase ofjointlypurchasedassets,thenominatedprimaryschool/CSUisresponsibleforcross chargingdepreciationtotheother. ModelofMeasurement Revaluation Revaluation Revaluation Revaluation Revaluation Cost Cost Cost Cost Cost Cost Cost Cost Cost Cost Cycle 3yearly 3yearly 3yearly 3yearly 3yearly

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(b) Thedepreciableamountofanassetistheinitialcostorrevaluedcostlesstheresidual value.TheUniversityisrequiredtocalculatetheresidualvalueofeachasset(inmost cases this will be immaterial). This estimate must be reviewed at the end of each financialyear,andifchanged,butbedisclosedasachangeinaccountingestimateinthe notestotheaccounts. (c) Thedepreciationmethodusedreflectsthepatterninwhichtheassetsfutureeconomic benefits are expected to be consumed by the University. The method and rates are reviewedannuallytoensuretheyremainappropriate. (d) Assetspurchasedsolelyforspecificresearchprojectsmaybedepreciatedoverthelifeof the project. Where the asset is not depreciated over the life of the project, the school owningtheprojectwillbeartheresidualdepreciation. (e) Leaseholdimprovementsaredepreciatedovertheshorteroftheunexpiredperiodofthe leaseandtheestimatedusefullifeoftheassets. (f) DepreciationmethodsandratescurrentlyinusebytheUniversityare: AssetClass Land BuildingStructures BuildingServices BuildingFitouts Infrastructureassets Leaseholdimprovements ComputingEquipment FinanceLeasedComputer Equipment ITSoftware Furniture&Equipment LibraryCollections Musicalequipment Vehicles MarineVessels Worksofart,classical antiquities,heritage collection,heritagemusical instruments,maraecarvings Depreciation Method Notdepreciated Straightline Straightline Straightline Straightline Straightline Straightline Straightline Straightline Straightline Straightline Straightline Straightline Straightline Notdepreciated(dueto heritagenatureofthe assets) UsefulLife indefinite 350 years(underadvice fromindependentvaluer) 1030years(underadvice fromindependentvaluer) 1050years(underadvice fromindependentvaluer) 540years(underadvice fromindependentvaluer) 2050years(underadvice fromindependentvaluer) 35years 13years 35years 315years 310years 513years 5years 16years

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4.5

ImpairmentofAssets (a) An asset could be considered impaired where its carrying amount falls below its recoverableamount. (b) Any impairment loss on a nonrevalued asset shall be recognised immediately in the Statement of Financial Performance. Any impairment loss on a revalued asset is recognised directly against any revaluation reserve to the extent that the impairment lossdoesnotexceedtheamountintherevaluationreserveforthatasset. (c) TheUniversityreviewsthecarryingamountsofallproperty,plantandequipmentonan annualbasis.

4.6

PhysicalVerificationofAssets (a) Schools/CSUsareprimarilyresponsibleforundertakingverification(stocktake)oftheir assets and specified items (except for land and buildings which will be subject to independent valuation and verification). This verification process, to be completed annually,istocover100%coverageoftotalassetsnetbookvalueandattractiveitems. (b) Financeisresponsibleforundertakingverificationandspecifieditems(exceptforland and buildings which will be subject to independent valuation and verification). This verificationprocessistocover: (i) Annualphysicalverificationofassetswithnetbookvalue/costover$50,000.00 (ii) Biannual physical verification of assets with net book value/cost between $20,000and$49,999.99 (iii) Tri annual verification of assets with net book value/cost between $1,000 and $19,999.99 (iv) Immaterialassetbelow$1,000willnotbesubjecttoassetverification. (c) The objective of physical verification is to maintain the integrity of the Universitys AssetRegisterby: (i) Ensuringthatalltheassetsheldarerecordedintheregister (ii) Verifyingthatallassetsintheregisterhavebeenphysicallylocatedandarestill functionalandinuse and (iii) Updating the register forunrecorded changes in asset ownership, responsibility orlocation.

4.7

DisposalofAssets (a) Schools/CSUsmaydeterminethatanassetis: (i) Obsoleteor (ii) Unserviceableor (iii) Tobetradedinor (iv) Tobesoldor (v) Missing(stolen)or (vi) Tobedisposedbyothermeans. (b) All requests for disposals must be supported by an authorised Asset Disposal Form obtainable from finance@vuw.ac.nz. Schools/CSUs are responsible for ensuring the

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FixedAssetAccountanthasbeenadvisedtoremovealldisposedassetsfromtheasset register. (c) Each School/CSU is responsible for the physical disposal of assets, except where the asset is specialised or unique in some way and specialist advisers are required to determinethebestmethodofdisposal.Allcomputingequipmentistobedisposedofby theUniversitysITSDepartment.Allsoftwareanddatastoredoncomputersandservers mustbe fully deleted andcleansed beforetheassetisdisposedof.
Note: ITScanarrangefor thedeletionand cleansingprocess.

(d) UndertheEducationAct1989,theUniversityisrequiredtoobtaintheconsentofthe Ministry of Education to dispose of, or sell assets where the value of those assets exceedsanamountdeterminedbytheMinister(contacttheFixedAssetAccountantfor moreadviceonthis).

LegislativeCompliance
The University is required to manage its procedure documentation within a legislative framework. Thelegislation directing this procedure is the: EducationAct1989

References
CapitalExpenditureBudgetGuide FinancialDelegatedAuthoritiesPolicy NZIAS16Property,PlantandEquipment NZIAS36ImpairmentofAssets

Appendices
AppendixA: AssetDisposalForm

ApprovalAgency
ChiefFinancialOfficer

ApprovalDates
This procedure wasoriginallyapprovedon: 5November2008 Thisversionwasapprovedon: Thisversiontakeseffectfrom: This procedure willbereviewedby: 5November2008 5November2008 5November2011

10 ContactPerson
Thefollowingpersonmaybeapproachedonaroutinebasisinrelationtothisprocedure: wilkinge GroupAccountant Finance Extension6534

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