General capital assets should be accounted for at historical cost (at estimated historical cost if actual historical cost is not practicably determinable). Cost is defined as consideration given or received whichever is more objectively determinable. It includes the purchase price or construction costs and also additional charges to place a fixed asset in its intended location and condition for use (i.e., freight and transportation charges, site preparation expenditures, professional fees, and legal claims directly attributable to asset acquisition). In the case of land, ancillary costs should also be included, such as legal and title fees, damage payments, site preparation costs (clearing, filling, and leveling), and the demolition of unwanted structures. In addition, costs of buildings and improvements other than the costs of construction should include professional fees of architects, attorneys, appraisers, etc., and related costs incurred during the period of construction.

Capitalizable costs include, but are not limited to, the following:

1. Land:
   • Original contract price
   • Brokers' commissions
   • Legal fees for examining and recording title
   • Cost of title guarantee insurance policies
   • Cost of real estate surveys
   • Cost of an option when it is exercised
   • Special paving assessments
   • Cost of razing an old building existing when the land is originally acquired
   • Cost of cancellation of unexpired lease
   • Payment of noncurrent taxes accrued on the land at date of purchase if payable by purchaser
2. Buildings:
   • Original contract price of cost of construction
   • Expenses incurred in remodeling, reconditioning or altering a purchased building to make it available for the purpose for which it was acquired
   • Cost of excavation, grading or filling of land for the specific building
   • Payment of noncurrent taxes accrued on the building at date of purchase if payable by purchaser
   • Architects' and engineers' fees for design and supervision
   • Costs of temporary buildings used during the construction period
3. Machinery and Equipment:
   • Original contract or invoice cost
   • Freight and drayage in, cartage, import duties, handling and storage costs
   • Specific in-transit insurance charges
   • Sales, use and other taxes imposed on the purchase
   • Costs of preparation of foundations and other costs in connection with making a proper site for the assets
   • Installation charges
   • Costs for reconditioning used equipment to make it usable for the purpose it was purchased
4. Construction in progress:
   • It is the responsibility of OGS to provide OSC with data related to the recording of construction in progress. This information is collected from OGS Design and Construction, State University Construction Fund and the Dormitory Authority. These three entities are responsible for most of the construction affecting the NYS Fixed Asset System.
   • Following are types of expenditures that should not be recorded as capital assets (not all inclusive):
   • Cost relating to the removal or demolition of buildings, structures, equipment or other facilities. The two exceptions are as follows:
     1. The cost to remove or demolish a building or other structure existing at the time of acquisition of land with the intention of removal or demolition to accommodate its intended use (such cost is considered a part of the cost of the land).
     2. The cost to remove or demolish a building or other structure with the intention of replacing the old asset (such cost is considered a part of the cost of the new capital project).
   • The cost of relocating a facility including the cost of relocating personnel. The cost of equipment rearrangement within a facility or the transfer of individual assets from one location to another should also be expensed.
   • Administrative and executive salaries even though a portion of such salary costs are related to fixed asset acquisitions.
   • Costs incurred on assets that were not purchased, e.g., surveying, title searches, legal fees, and other expert services on land not purchased.
   • Extraordinary costs incidental to the construction of capital assets such as those due to strike, flood, fire or other casualties.
   • The cost of abandoned construction.
   • The costs of normal repairs and maintenance that do not add to the value or extend the lives of assets materially are not capitalized, but are shown as expenses in the year incurred.
5. Intangible Assets
   • Internally Generated Intangible Assets – expenses should only be capitalized when all of the following have occurred:
     1. Determination of the specific objective of the project and the nature of the service capacity that is expected to be provided by the intangible asset upon the completion of the project
     2. Demonstration of the technical or technological feasibility for completing the project so that the intangible asset will provide its expected service capacity
     3. Demonstration of the current intention, ability, and presence of effort to complete or, in the case of a multiyear project, continue development of the intangible asset.
   • Other intangible assets should be capitalized when one of the following two conditions is met:
     1. The asset is capable of being separated or divided from the government and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract, asset, or liability
     2. The asset arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.

Donated capital assets should be recorded at their acquisition value at the date of donation. Per Paragraph 79 of GASBS 72 - Fair Value Measurement and Application, acquisition value is the price that would be paid to acquire an asset with equivalent service potential in an orderly market transaction at the acquisition date, or the amount at which a liability could be liquidated with the counterparty at the acquisition date. 

General capital assets acquired by tax foreclosure which are to be retained by the government for its own use should be capitalized at their fair value on the date foreclosed, but not in excess of the tax liens satisfied by such foreclosure.

Guide to Financial Operations

REV. 10/18/2023