Capital Expenditure and Fixed Assets Accounting Policy
Purpose
This policy addresses capital expenditure and the accounting treatment of property, plant and equipment, leasehold improvements, library collections, and intangible assets (collectively referred to as “fixed assets”).
It will provide guidelines for controlling and managing fixed assets.
It is to be read in conjunction with the Asset Management Policy.
It seeks to ensure consistency across the University members in relation to capital spend, and the definition, recognition, measurement, reporting, control, and disposal of assets.
Planning
Capital expenditure may be funded from one or more of the following sources:
- Standard Capital Budget Allocation
- SRI Fund
- Small Service Division pool
- Externally Funded Research
- Philanthropy
- Non-standard Capital Budget Allocation via business case approved by the Vice-Chancellor or delegate, or, where the amount sought exceeds the Vice-Chancellor’s delegated authority, the University’s Capital Expenditure Committee
All faculties and service divisions at Level 2 and 2A of the University’s Organisational Structure (UOS) that receive a Standard Capital Budget Allocation must prepare a Capital Expenditure Plan as part of the Annual Planning and Budgeting Process, which includes:
- a current schedule of assets classified by condition and functionality scores as determined in the associated Asset Management Plan
- a schedule of proposed asset purchases incorporating the prioritised budgeted items for the following year, forecast acquisitions for the following two years and projections of asset replacements and/or upgrades for critical or specialised assets where the economic life for those assets extends beyond three years
- assets related to joint Capex proposals with Property Services and
- sources of funding other than the Standard Capital Budget Allocation, where known at the time of submission
Following consideration of the Capital Expenditure Plans, the Budget Working Group are to advise the approved Standard Capital Budget Allocation for the following year.
Subsequent changes to the prioritised schedule of acquisitions are to be advised to Finance and reported in the next Semestral Review.
Faculties and service divisions that hold an approved Standard Budget Allocation are required to provide estimates of cash flows and their timing, in accordance with the annual planning timetable.
Forecast adjustments reflecting changes to estimated timing and/or level of capital expenditure must be submitted in line with the forecast process.
Where capital purchases more than $100,000 are intended to be made from offshore suppliers, the purchaser is required to liaise with the University’s Treasurer within the Finance Division.
Approved Capex budgets do not constitute authorisation to incur the expenditure.
Note - Each individual Capex purchase must be approved in accordance with the Financial Delegations Policy, and be supported by an approved business case where stipulated, before any commitment to expenditure is made.
Faculties and service divisions must plan for the management of asset disposals through regular monitoring of assets that are approaching the end of their useful lives.
Overview of the Asset Life Cycle
The asset life cycle below is used to classify expenditure both correctly and consistently to generate accurate information for the purposes of asset management and decision making (see Appendix 1 for Asset life cycle details).
The asset life cycle is also used to give guidance on the appropriate accounting treatment for expenditure activities that may occur during each phase (see Appendix 3).

Environmental Impact
The environmental impact of assets refers to the effects that various types of assets have on the environment throughout their lifecycle, it is essential to consider the environmental footprint impact of the day-to-day work activities, while making the economical choices to purchase and develop the assets. The University should consider various factors when making this choice, including the environmental impact, cost-effectiveness, availability, and technological feasibility.
Acquisition of Fixed Assets
For capital purchases, irrespective of funding source, the purchase must be authorised in accordance with the Financial Delegations Policy, with the exception of library collections purchases, which are authorised as part of the Collection Management Plan.
Asset purchases whose capital cost exceeds the financial delegation of the dean or director require a business case be prepared and reviewed.
The type of business case required, the approval level and the quality assurance requirements vary according to the capital cost, the complexity of the acquisition and risk profile.
Control mechanisms must be used to track individual purchases as they are allocated to a project or a collective purchase.
Each business case must outline proposed control mechanisms in the “Management Case” section.
The relevant approver must either endorse these control mechanisms or require revised control mechanisms. Note - All capital purchases must meet the requirements set out in the Procurement Policy.
Joint asset acquisitions by two or more faculties or service divisions require:
- approval from both faculties or service divisions involved
- the identification of a primary faculty or service division to take custody of, and responsibility for, the asset.
Acquisition of leased assets
Acquisitions of leased assets must adhere to the same procedures as the outright purchase of assets even though leased assets are not capitalised.
All lease acquisitions must also be authorised by the Chief Financial Officer (or delegate), except for leased library collection assets that are authorised by the University Librarian.
A lease acquisition must be authorised based on purchase price, not annual lease payment or total lease commitment.
Construction of fixed assets
Capex related to the construction of a fixed asset must be recorded in the Balance Sheet as Work in Progress (WIP) until such time as the fixed asset is available for use.
The associated costs of feasibility studies are to be recognised as expenditure in the period they are incurred.
Independent components of a larger fixed asset must be capitalised as and when they become available for use, regardless of the completion of the fixed asset as a whole.
Acquisitions of fixed assets using externally funded research (EFR) funds or philanthropic funds
Where an asset is purchased via EFR or philanthropy, this policy continues to apply, and the asset must be recorded in the Asset Register.
Acquisition of replacement assets
Where there is a proposal for an acquisition of a replacement asset, the disposal of the existing asset and any expected proceeds/write-off must form part of that proposal.
Prepayments for capital expenditure must be recorded as such in the Balance Sheet until the asset can be fully capitalised, or transferred to Work in Progress (WIP).
Acquisition of donated assets
Where an asset is donated to the University by an external party, the asset must be recorded in the Fixed Asset Register and the Gift Register at its fair value at the date it is acquired.
Fixed Asset Register
All fixed assets must be affixed prominently with an official University barcode tag as soon as the asset is received or completed. Exceptions include the following asset types:
- electronic resources, including computer software
- pool assets
- transportation, including motor vehicles and
- library collections, which are tagged with RFID tags
Faculties and service divisions are responsible for tagging and tracking their fixed assets.
If it is impractical to affix an asset tag sticker, a uniquely identifying number must be obtained from the asset itself (e.g. serial number, IMEI number, vehicle registration, etc.).
An asset record for all fixed assets must be created in the Fixed Asset Register.
Assets must be recorded as either:
- Financial assets (capitalised) or
- Leased assets (non-capitalised) or
- 'Attractive’ assets (non-capitalised)
The University’s policy is to only capitalise assets that meet a certain threshold (see Appendix 2) to support the effective asset management, and to ensure the cost of administration does not exceed the benefits of recording the information.
The following are exceptions to the thresholds in Appendix 2:
- All library collections, irrespective of price
- All individual works of art irrespective of price
- IT equipment (excluding software) of $1,000 or over
Costs below the capitalisation thresholds are to be expensed in the period incurred.
Where individual assets below these capitalisation thresholds, but similar in type, timing, individual cost and estimated useful life are purchased, they must be pooled as a single asset record.
To be included as part of a pooled asset, the items being grouped must still meet all other required conditions of a capitalised asset, i.e.:
- have a useful life in excess of one year
- has not been acquired or constructed with the intention of resale and
- may include such expenditure incurred on an existing asset to improve its functionality and/or extend its useful life but not merely reinstate the future economic benefit of an asset (i.e. repairs and maintenance)
The cost of an accessory which is acquired for permanent attachment to an existing capitalised asset must be added to the existing asset if it meets any of the above capitalisation thresholds, except for pooled assets.
Where a pooled asset is created, the capitalisation thresholds apply to the total cost of the pool, and the quantity for the asset record must match with the quantity of the members in a pool.
Fixed assets that individually meet or exceed the threshold for a Financial (Capital) Asset may not be pooled.
Pooled assets that also meet the definition of ‘attractive’ must also be recorded individually as attractive assets with identifying information and are therefore not exempt from affixation of asset tags.
Library collections are excluded from the pooled asset policy requirements in this policy.
Individually identifiable components of an asset, with a differing classification and/or useful life to the predominant component or parent, are to be recognised as separate and distinct assets.
Subsequent Expenditure (after asset capitalisation)
Subsequent expenditure on capital assets
Faculties and service divisions are responsible for the physical maintenance and security of their fixed assets.
A common form of subsequent expenditure is repairs and maintenance. The cost of servicing or repairing an asset is not treated as capital expenditure, as it maintains the useful life and existing service potential rather than extends it.
The subsequent expenditure incurred to improve an asset, or a major update are capitalised only when certain conditions are met:
- The expenditures are $5,000 or more, and
- It extends the useful life of the asset, and
- It enhances the assets expected service potential beyond its original condition
Subsequent expenditure to improve an asset that is under $5,000 must be expensed.
If an asset(s) has been damaged and their fair value impaired, and the subsequent repair cost is used to reinstate the future economic benefits and service potential and restore the asset back to its condition prior to the damage, the cost can be considered for capitalisation if the above threshold is met.
If subsequent expenditure extends the useful life of the asset, the depreciation charge for the base asset and subsequent expenditure will be modified to reflect the revised useful life.
Location and Asset Manager of Fixed Assets
Faculties and service divisions must ensure the current physical location and an asset manager responsible for their fixed assets (including leased and attractive items) are recorded in the Fixed Asset Register.
All University members are responsible for notifying the finance team for the faculty or service division when the location or asset manager of a fixed asset changes.
All fixed assets (including leased and attractive items) that are used or taken off-campus are required to be recorded as such in the Fixed Asset Register or the Library Management System.
Depreciation and Amortisation of Fixed Assets
Depreciation is charged on capital assets to allocate the cost of the assets over their estimated useful lives. Depreciation charges are recognised as an operating expense in the period they relate to. Once an asset has been created, a monthly charge, called depreciation for tangible assets and amortisation for intangible assets (with definite useful life), is incurred, and recognised as an operating expense. This process allows the cost of the asset to be expensed systematically over its useful life.
The depreciable amount is the cost of the asset less its residual value. Annual depreciation is calculated by dividing the depreciable amount by the useful life (in years) of the asset. All fixed assets that are consumed are depreciable and all depreciation is calculated on a straight-line basis (i.e. in equal monthly instalments). Land and some heritage assets are not consumed and are not depreciated. Special Collection Library Collection is not depreciated. Works of Art is not depreciated.
Depreciation of an asset must commence from the first day of the month in which the asset is acquired, or in which it becomes available for use (in the case of a constructed asset).
Asbestos Remediation Treatment
A provision shall be held based on the most up to date forward works programme approved by Council for all identified buildings requiring asbestos remediation.
The provision shall be reviewed at least annually and updated to reflect both changes to the work programme and updated asbestos remediation costs.
Asbestos remediation costs shall be charged to the provision where included in the latest forward work programme. Asbestos remediation costs for other work shall be charged directly to the P&L, no asbestos remediations costs are to be capitalised.
Verification of Fixed Assets
Stock takes to physically verify the existence, location, and functionality of all fixed assets over $100k Gross replacement cost (excluding Works of Art and Library Collections) must be carried out every two years on a rolling basis.
A write-off or adjustment must be made in the Fixed Asset Register, and an operating expense recognised, for any capital assets identified in the stock take that:
- cannot be physically verified or
- are damaged and non-functional
Authorisation in accordance with this policy must be obtained prior to the above adjustments being made.
Stock take documentation must be retained for sighting by external auditors.
Disposal of Assets
Loss or damage to university assets and insurance claims
Where a fixed asset has been lost, stolen or maliciously damaged, faculties and service divisions are required to immediately report the situation to:
- the New Zealand Police and/or local authorities, if the asset is located outside of New Zealand
- the University’s insurance brokers, by completing an insurance claim form, in accordance with the University Insurance Policy
Assets that are lost, stolen, or damaged beyond repair are to be disposed of in accordance with this policy.
Any proceeds from insurance claims are to be recognised as income.
Where a claim results in a replacement asset, the replacement asset must be capitalised at fair value.
Disposal
All fixed asset disposals (both physical and in the Fixed Assets Register) must be authorised in accordance with the Capex Approval Limits set out in the Financial Delegations Policy. For replacement assets, the disposal approval may be obtained together with the approval for acquisition of the replacement asset.
The written consent of the Secretary will be sought for the sale or disposal of assets, or interests in assets in accordance with section 282(4) and (5) of the Education and Training Act 2020.
The disposal of land and buildings (including demolitions) over $15m require consent from TEC.
The disposal of plant and equipment and financial assets over $50k require consent from TEC.
The University Librarian has final decision on the relegation and deselection of library collection assets, and the following policy requirements relating to fixed asset disposals do not apply to these assets.
For the purposes of applying Capex Approval Limits, the original cost price or fair value of the asset being disposed of must be used.
Net Book Value must not be used as the basis for authority.
Fixed assets may be disposed of if they are:
- obsolete
- unusable
- traded-in/sold
- missing (e.g. lost or stolen)
- scrapped or
- to be donated/gifted to an external party
Fixed assets cannot be disposed of merely because:
- they have been fully depreciated; or
- the depreciated value is less than the capitalisation threshold set out in this policy
Where a fixed asset is traded-in for another asset, the trade-in of the old asset and acquisition of the new asset represent two separate and distinct transactions, and require two separate records in the Fixed Asset Register.
If the asset has not been depreciated or impaired down to zero, a loss on disposal will be identified. A write-down of the remaining net book value shall be reported as a loss on disposal expense in the relevant Faculty or Service Division cost centre.
If there is any revaluation reserve allocated to the assets, the attributed revaluation amount shall be transferred from the revaluation reserve to General Equity within equity.
Disposal of a fixed asset that is likely to result in a loss on disposal exceeding $5,000 require justification, including the reasons and means of disposal.
Where a specialised or unique asset is to be disposed of, faculties and service divisions must consult the relevant specialists (e.g. ITSS, Property Services, etc.) to determine the best possible means of disposal.
Fixed assets authorised for disposal must be made available for sale and advertised to all University staff members and students.
Where more than one party makes known their intention to purchase a fixed asset, the asset must be sold to the highest bidder.
No preference may be given to any party or individual.
Where practical, the selling price of a fixed asset is set at market value.
However, if a fixed asset is unable to be disposed of within a reasonable time frame, or the cost to advertise and arrange sale of the fixed asset exceeds the probable return from the sale, the asset may be sold below market value, or scrapped in an ethical manner.
The University offers no guarantees or warranty on the condition of the fixed assets it sells.
Training and Communication Costs
Purchase or development of training material and e-learnings can be capitalised, such as training documents, flow charts and learning modules. Staff training on project delivery or communication and associated costs cannot be charged to the capital project, they must be expensed. This includes staff development training, project enabling training, project delivered training, and costs associated with the training delivery (e.g. time, travel, accommodation, etc.), and project communication costs.
Travel Costs
The treatment of travel costs such as airfares and accommodation are dependent on the phase of the project. Costs incurred during the design, build, and implement phases should be capitalised. Costs incurred during the concept and planning, training, and post-implementation phases should be expensed.
Software as a Service(SaaS)
The University may invest in “on demand” cloud computing arrangements and does not have possession of the underlying software, also known as SaaS assets. The University accesses and uses the software on an as-needed basis.
Service arrangement
SaaS arrangements do not usually give rise to a software asset. They generally do not meet the definition of a lease and do not pass the control test.
A contract that conveys to the University only the right to receive access to the supplier’s application software in the future is a service contract, the access to the software over the contract term (the control test is generally not met).
See Appendix 4 for SaaS Decision Flow – services or an asset.
SaaS test:
- The service software is not installed on the University specified computer systems (i.e. behind cloud provider specified firewall).
- The University does not have the right to take possession of a copy of the software and run it on the University’s own or a University specified third party computer infrastructure during the hosting period without significant penalty.
- The University does not have the exclusive rights to use the software or ownership of the intellectual property for customised software and the SaaS provider can make the software available to other customers.
- The University does not determine when the modified software is reconfigured or updated. The SaaS provider controls when this is done.
Key SaaS features:
- The SaaS provider (or another third party) manages the software infrastructure.
- Access is provided to multiple customers on as need basis over the internet via a dedicated line.
- Service customisation is often limited, and any software configuration is largely available to all customers.
- The provider maintains full ownership and control of the software and is responsible for maintenance, support, and release upgrade.
- Service fees accrue and are payable on a recurring, periodic basis.
SaaS Configuration and customisation cost
Certain configuration and customisation activities undertaken in implementing SaaS arrangements can only be capitalised where the University has the power to obtain future benefits and are able to restrict others access to these benefits.
E.g. creating a new interface between a university’s existing software and the hosted software may result in the creation of a separate intangible asset – writing new software code that the University controls.
Otherwise, the University cannot capitalise the cost because we do not control the software being configured or customised and those configuration or customisation activities do not create a resource controlled by the University that is separate from the software. The cost was incurred only to setup the software’s existing code to function in a specified way.
See the quick reference guide in Appendix 4 for what type of expenditure is capital in nature and when to recognise the cost.
The business should seek advice from the Finance team on a case-by-case basis if they feel their project may fall into a SaaS arrangement.
Internal Transfer of Fixed Assets
Fixed assets may be transferred between business groups or cost centres with the written consent of the transferring and receiving managers. The asset will retain its original asset number but its cost centre code in the general ledger will be changed to the recipient’s cost centre. Any subsequent depreciation will be charged to the recipient’s cost centre.
Transfers are actioned by completing an asset transfer form (FS-05) and sending it the Finance Asset Accounting team.
Asset Revaluations and Impairment Testing
Asset revaluations
Revaluations of land and buildings, works of art, and library collections shall be coordinated by the Finance Asset Accounting Team and made with sufficient regularity as to ensure that the carrying amount does not differ materially from that which would be determined using fair value at balance date. A qualified independent valuer must conduct the valuation. The revalued assets are inspected by the valuer on a rolling 3 yearly basis, at a minimum. Annual fair value assessments are undertaken every non-valuation year to determine if the values are still representative of fair value. The University applies the following criteria to assess fair value: ranges of +/- 1% to 5% are indicative of fair value, ranges of +/- 6% to 10% are indicators a revaluation is likely, ranges of +/- 11% or greater require a full revaluation.
The revaluation movements are accounted for on a class-of-class basis. The net revaluation results are credited or debited to other comprehensive revenue and expense and are accumulated to an asset revaluation reserve in equity for that class of asset. Where this would result in a debit balance in the asset revaluation reserve, this balance is not recognised in other comprehensive revenue and expense but is recognised in the surplus or deficit. Any subsequent increase on revaluation that reverses a previous decrease in value recognised in the surplus or deficit will be recognised first in the surplus or deficit up to the amount previously expensed, and then recognised in other comprehensive revenue and expense.
Accumulated depreciation at revaluation date is eliminated against the gross carrying amount so that the carrying amount after revaluation equals the revalued amount.
Impairment testing
Impairments of property, plant and equipment are recognised in accordance with PBE IPSAS 21 Impairment of Non-Cash-Generating Assets or PBE IPSAS 26 Impairment of Cash-Generating Assets, as appropriate.
Impairment test is required where a fixed asset has sustained significant damage, but it is expected to be useable again once repaired. It is not derecognised (written-off) but the fixed assets value may need to be impaired to reflect the extent of the damage from the event.
In certain situations, the carrying amount of an asset may not be recovered from future business activity or consumption of service potential. The impairment test will assist in checking that asset and/or project expenditure is correctly accounted for as capital in compliance with the accounting standards and policies.
Where there is indication of impairment of a non-cash-generating asset, PBE IPSAS 21 requires the recoverable service amount of the impaired asset to be calculated. The recoverable service amount is the higher of a non-cash-generating asset’s fair value less costs to sell and value in use. PBE IPSAS 26 covers the impairment of cash-generating assets where there is an indication of impairment.
Where an impairment is identified, a write-down of the carrying value of the asset to its impaired amount should be charged as an expense or treated as a revaluation decrease if the asset is carried at a revalued amount, to the extent the revaluation reserve for that class of asset is sufficient.
Before the end of each financial year, the Finance Asset Accounting Team will co-ordinate a review of fixed assets for impairment of value. The test will be based on an “effective date” of 31st December.
In assessing whether there is any indication of impairment, business owners, ICT and Finance should consider:
- External sources of information – significant, existing, or pending, in the natural disaster event, technological, economic, legal, or political environment which change the way the asset is used or is expected to be used.
- Internal sources of information – significant changes, existing or pending, in the strategic or operational environment which change the way the asset is used or is expected to be used. Changes include the asset becoming idle, plans to discontinue or restructure the operation to which the asset belongs, or plans to dispose of an asset before the previously expected date. Evidence of obsolescence or physical damage may also be an indicator of impairment.
- Work in progress – capital projects must continually be assessed as to whether the charges incurred to date are contributing to the output of the final asset. There may be deliverables or parts of the project that are not in use and will not provide economic benefit or service potential in the future. Any redundant costs (of a material nature) should not be capitalised. Such costs incurred in the current financial year should be expensed and costs relating to a previous year should be impaired to the relevant responsibility/cost centre.
Definitions
The following definitions apply to this document:
Acquisition value of an assets is the amount of money or other consideration paid to acquire the asset. It is usually equal to the fair value of the asset, which is the price that a willing buyer and seller would agree on.
Amortisation means the systematic allocation of the depreciable amount of an intangible asset over its useful life.
Asset management plan refers to a documented plan established by the asset owner that details current assets, including critical and specialised assets, the condition of such assets and the replacement and maintenance programmes planned to ensure required assets remain fit for purpose, identifies asset managers responsible for the operation and management of the scheduled assets and contains the asset lifecycle information, including future asset acquisition requirements, necessary to support the development of the annual Capital Expenditure Plan.
Asset manager is the person responsible for the operation and management of an asset over the lifecycle of the asset as delegated by the Asset Owner.
Asset owners are capital budget holders in faculties and service divisions at level 2 or 2A in the University’s Organisational Structure (UOS).
Assets mean a tangible or intangible resource owned by the University as a result of past events and from which future economic benefits are expected to flow to the University. These include property, buildings, plant, machinery, vehicles, IT infrastructure, software, art and library collections, and scientific equipment.
Attractive items are items that are prone to theft and/or loss due to their portable nature and/or attractiveness for personal use and/or resale such as laptops, tablets, cameras, and smart phones. Attractive assets are not capitalised to the University’s balance sheet, but they are recorded in the Fixed Assets Register for tracking purposes.
Budget Working Group means the group responsible for establishing the operating budget of the University and allocating capital expenditure associated with submitted Capital Expenditure Plans.
Business case is a document that provides the reasoning for a capital proposal and outlines the incremental cash flows associated with it.
Capital Expenditure (Capex) is defined as the:
- acquisition of land, or
- acquisition, extension, modification or refurbishment of a building, or
- acquisition of a piece of equipment, or
- acquisition or development of an IT system or application, or
- acquisition of shares or equity like investments outside of investing the University’s working capital, or • acquisition of a work of art, or
- acquisition of Library Materials
where the resulting expenditure would be capitalised under the University’s Accounting Policies.
In addition, a “capital expenditure proposal” shall also be deemed to include a write-off, write-down, disposal or demolition of assets currently capitalised as well as long-term leases whose size and duration of commitment is akin to capital expenditure. (For the avoidance of doubt, all new or renewed leases where the undiscounted committed lease payments exceed $2.5 million shall be treated as “capital expenditure”.)
Capital Expenditure Plan refers to an annual plan detailing current assets categorized by condition, proposed replacement schedule, additional capital items required and sources of funding.
Configuration involves the setting of various ‘flags’ and ‘switches’ within the application software, or defining values or parameters, to set up the software’s existing code to function in a specified way.
Customisation involves modifying the software code in the application or writing additional code; it generally changes, or creates additional, functionalities within the software.
Depreciation is the systematic measure of consumption of future economic benefits embodied in an asset over its useful life; representative of general wear and tear from use or the reduction in value due to the relative obsolescence of the asset as time passes.
Economic Life is the expected period of time during which an asset remains useful and profitable to the Department, the economic life of an asset may differ from its actual physical life.
Electronic resources means applications and knowledge-based reference sources for which the University pays an access fee for use, or purchases outright (e.g. computer software, data access resources, etc.).
Externally Funded Research means research activities funded through a research contract where external parties usually specify the use of funds.
Fair value is an amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction in an active market. If a market price is unobtainable, a best estimate resulting from available information such as quotes or estimates for similar assets in identical condition or identical assets in a similar condition and by making reasonable adjustments.
Financial delegation means the monetary limits specified at various hierarchical levels in the Financial Delegations Policy to allow authority to approve expenditure.
Fixed assets are defined as:
- assets with an expected useful life in excess of one year (i.e. a non-current asset);
- assets not intended for resale or to be used as a material in the construction of an asset intended for resale;
- items of property, plant and equipment;
- software licenses with an indefinite life;
- items leased to the University (Leased Assets); and
- items with a high risk of being lost or stolen (Attractive Assets).
Fixed Asset Register is the system used to record, maintain and report on the fixed assets held by the University. The University uses the Asset Management module of PeopleSoft Financials as its Fixed Asset Register. A separate Library Management System is also used to record non-financial information relating to library collection assets.
Future economic benefits or services potential is the ability for the fixed asset to contribute to the Department objectives of goods and services. The future economic benefits or service potential flowing from an asset include revenue from the sale of products or services, cost savings, or other benefits resulting from the use of the asset by the entity.
General overhead costs are those that are not directly attributed to the production of goods or services but are necessary for the ongoing operation of a business. Examples of general overhead costs include but are not limited to business insurance, office supplies, advertising, audit fees, and payroll etc.
Impairment is a permanent reduction in the value of an asset where it is determined that the current net book value of the asset exceeds the recoverable amount. Impairment can occur due to factors such as wear and tear, lack of maintenance, new technological innovations/obsolescence, etc.
Intangible asset is an identifiable non-monetary asset without physical substance. Leased Asset is an asset owned by a third party but for exclusive use by the University in exchange for periodic lease payments.
Leased assets are not capitalised to the University’s balance sheet, but they are recorded in the Fixed Assets Register for tracking purposes.
Library Collections include physical and electronic materials and resources to support the University’s current and anticipated research, teaching and learning needs. It also includes special collections of materials deemed worthy of preservation because of their uniqueness, rarity or monetary value.
Loss/(Gain) on disposal is the difference between an asset’s net book value and the net amount recovered on disposal (i.e. sale or scrap) of the asset.
Net book value (NBV) is the original cost of an asset (i.e. purchase or construction costs, plus costs to bring it to location and condition intended for use), plus any additions or disposals, less accumulated depreciation costs and impairment loses.
Obsolescence is a loss in the utility of an asset due to the development of improved or superior assets of equal utility, but not due to physical deterioration.
Off-campus asset includes portable assets (e.g. laptops, etc.) used by designated staff or temporarily loaned to University staff, and assets that are permanently affixed on another site other than University campus (e.g. field locations, private residence, etc.).
PBE IPSAS stands for Public Benefit Entity International Public Sector Accounting Standards.
Pooled Assets are a method where multiple low-value assets are grouped together into one asset, allowing for capitalization and depreciation to be calculated on the entire pool.
Project is a collection of revenue, expenses and capital expenditure with the common objective of achieving a particular outcome.
Recoverable amount is the value of expected future economic benefits that can be obtained from an asset, either by continued use, or sale of that asset.
Repairs and Maintenance refer to costs incurred for recurring tasks needed to maintain or restore an asset to a condition where it can be used for its intended purpose. This includes work aimed at preventing asset damage. Such costs are expensed in the period they are incurred. For examples, refer to the Capital Expenditure and Fixed Assets Guidelines.
Risk profile refers to the Investment Decision Matrix on the USPO sharepoint site.
Software as Service (SaaS) is a cloud computing arrangement in which the Faculty/Service Division contracts to pay a fee in exchange for a right to receive access to the supplier’s application software for a specified term.
SRI Fund refers to the Shared Research Infrastructure (SRI) Fund supports purchase or establishment costs and ongoing ownership costs for University-scale Research Infrastructure-specialist equipment, facilities, or expertise that enables research and teaching activity for University-wide user communities, and/or has ownership costs that are too high to be borne by the hosting faculty/LSRI alone.
Standard Capital Budget Allocation refers to the expenditure required for a Faculty or Service Division to sustain its current operations, support growth, and plan for the replacement of assets as they become outdated.
University means Waipapa Taumata Rau, University of Auckland but does not include its subsidiaries.
University members include members of Council, committee members, students, staff members, committee appointees, the University’s companies’ staff members and board members and contractors working for and on behalf of the University.
Useful life refers to the period of time over which the future economic benefits of an asset are expected to be consumed; Or the total service, expressed in terms of production or similar units, expected to be obtained from an asset.
Value in use is the expected future cash flows that the asset in its current condition will produce, discounted to present value using an appropriate discount rate.
Work in Progress (WIP) or Assets Under Construction (AUC) refers to the total costs accumulated during the construction or acquisition of an asset, which will be capitalized once the process is finished.
Key relevant documents
Include the following:
- Education and Training Act 2020
- Asset Management Policy
- Financial Delegations Policy
- Procurement Policy
- Sensitive Expenditure Policy
- Capital Expenditure and Fixed Asset Guidelines
Document management and control
Owned by: Chief Financial Officer
Content manager: Group Financial Controller
Approved by: Vice-Chancellor
Date approved: March 2017
Reviewed date: March 2025
Next Review date: March 2028
Appendix 1 – Asset life cycle

- Concept & planning – this phase includes the long-term planning of capital expenditure, feasibility research, submission of business cases and requests to proceed, and the scheduling of approved capital expenditure.
- Design, Build & Implement – this phase involves the purchase, design and development of assets, project completion, activities required to make the asset operational, and transfer of the asset from work-in-progress to the asset register.
- Training & post-implementation – this phase includes the activities to deliver the new asset into service, such as training and communication.
- Operation – this phase includes any repair and maintenance of the asset to maintain it in good working condition, safeguarding of physical assets, periodic review for potential upgrade, and depreciation. It also includes post-implementation reviews to enhance future projects based on lessons learnt.
- Disposal – this phase records the asset retirement and subsequent disposal.
Appendix 2 - Asset Capitalisation Thresholds
For the purposes of this policy, an asset is categorised as either “tangible”, “intangible” or “internally developed software”.
Asset type | Acquisition or construction cost | Benefit controlled by [Department/ Ministry] |
Acquisition or construction performed | Directly attributable costs |
---|---|---|---|---|
Tangible items (e.g. motor vehicles, ICT Note exceptions to the |
Over [$5,000] NZD | More than 1 year | Externally | Majority of transactions with third party suppliers |
Intangible items (other than internally developed software) |
Over [$5,000] NZD | More than 1 year | Externally |
Majority of transactions with third party suppliers |
Internally developed software (Intangible) |
Over [$50,000] NZD | More than 1 year | Internally | Majority of transactions are internally generated |
Appendix 3 – Treatment of Capital and Operating Expenditure
1. Project Expenditure (excluding SaaS arrangement – see Appendix 4 - SaaS Decision Flow)
This quick reference guide covers general examples where there is a clear distinction between when to expense (opex) and when to capitalise (capex), please contact the Finance Asset Accounting Team for any queries.
Activity Description What is the activity that is undertaken at this Time? |
Deliverable What is it that is Produced by the Activity? | Treatment Expense or Capitalise |
---|---|---|
Prepare and approve Product Concept Case |
Approved concept case |
Expense |
Prepare and approve Initiative Business Case |
Approved initiative business case |
Expense |
Development and sign off of Project Scope |
Approved project scope |
Expense |
Development of Project schedule, & planning project resources |
Agreed schedule & resources for requirements & design |
Expense |
Develop and Approve High Level Requirements |
Approved macro solution requirements |
Expense |
Create Project and Forecast costs in FMIS system |
Project structure, budget loaded & forecast entered |
Expense |
Set up Project Management & Controls (e.g. Risks, Issues, Change Mgmt.) | Project management controls in Place |
Expense |
Develop and approve Project Management Plan |
Approved Project Management Plan |
Expense |
Prepare and Approve Design Business Case |
Approved Design Business case |
Expense |
Develop and draft detailed requirements |
Approved draft detailed requirements |
Expense |
Develop and draft Detailed Solution Design |
Approved draft detailed solution design |
Expense |
Develop and Approve Change - Execution & Implementation Plan |
Approved Change - Execution & Implementation Plan |
Expense |
Develop and Approve Configuration Management Plan |
Approve Configuration Management Plan |
Expense |
Process and Support impact analysis |
Process and Support impact analysis documentation |
Expense |
Review of options/approach and assessment or legal disputes, decommissioning of an existing asset that is being replaced |
Procurement process and exit cost |
Expense |
Prepare and Approve Business case |
Approved Business Case |
Expense |
Activity Description What is the activity that is undertaken at this Time? |
Deliverable What is it that is Produced by the Activity? |
Treatment Expense or Capitalise |
---|---|---|
Develop and Approve Detailed Solution Design(s) |
Approved Macro Solution Design(s) |
Capitalise |
Review Schedule and Resource Plans |
Revised Schedule & Resource Plans |
Capitalise |
Maintain Project Mgmt. & Controls (e.g. Risks, Issues, Change Mgmt.) |
Project Management Controls up to date |
Capitalise |
Prepare and manage Change Request |
Approved/Rejected Change Request |
Capitalise |
Update Project and Financial Forecasts |
Project structure up to date, and forecast loaded |
Expense |
Perform Release planning |
Release Management Plan |
Capitalise |
Develop and Approve Test Plan |
Approved Test Plan |
Capitalise |
Develop and Approve Detailed Requirements |
Approved Detailed Requirements | Capitalise |
Develop Test Cases |
Draft Test Cases |
Capitalise |
Prepare Build Business Case Supporting Collateral |
Build Business Case Information prepared | Capitalise |
Prepare and Approve Build Business Case |
Approved Build Business Case |
Capitalise |
Develop and Approve Test Strategy |
Approved Test Strategy |
Capitalise |
Negotiate and sign Contracts |
Finalised Contracts |
Capitalise |
Develop data migration strategy and plan |
Approved data migration strategy and plan |
Capitalise |
Update and approve Project Management Plan |
Approved Revised Project Management Plan |
Capitalise |
Build Capability / Functionality |
Capability Built in Development environment |
Capitalise |
Implement Capability / Functionality to Development Environment |
Capability Implemented in Development environment |
Capitalise |
Perform data migration and data cleansing |
Data reconciled and migrated to development environment |
Expense |
Legal or professional fees |
Directly attributable to preparing the asset for use or specific to acquisition (e.g. acquisition due diligence) |
Capitalise |
Purchase or develop a specific data conversation software for the purpose of transition |
Tool(s) enables the data migration |
Capitalise |
Finalise Test Cases |
Agreed Test Cases |
Capitalise |
Test Functionality in Development environment |
Test Summary Report prepared |
Capitalise |
System or Platform Support (Development Environment) |
Development Environment Operational |
Capitalise |
Develop Collateral, Procedures, excl Training |
Documented Collateral |
Capitalise |
Develop and approve Implementation Plan |
Approved Implementation Plan |
Capitalise |
Update & Approve Operational Impact (Readiness) Review |
Approved Operational Impact Assessment |
Capitalise |
Prepare and approve Deployment Plan |
Approved Deployment Plan |
Capitalise |
Implement Capability / Functionality to Production |
Capability Implemented in Production |
Capitalise |
Test & Accept Capability in Production |
Signed Acceptance of Solution in Production |
Capitalise |
Activity Description What is the activity that is undertaken at this Time? |
Deliverable What is it that is Produced by the Activity? |
Treatment Expense or Capitalise |
---|---|---|
Produce Training documentation, purchase / development of training material and e-learnings | Develop training | Capitalise |
Staff training on project delivery or communication and associated costs (e.g. rooms,travel, and Trainer’s time) | Deliver training | Expense |
Time sheeted time of employees attending training |
Trained Employees |
Expense |
Launch or Cutover | Capability Launched (bring asset into operation) |
Capitalise |
Post-launch enhancements required to production solution |
Completed Functionality in Production |
Capitalise |
Activity Description What is the activity that is undertaken at this Time? |
Deliverable What is it that is Produced by the Activity? |
Treatment Expense or Capitalise |
---|---|---|
Project Warranty costs (prior to Acceptance) |
Defect-free Production system |
Capitalise |
Project team handover after project closure | Operational handover |
Expense |
Production System or Platform Support (Post Acceptance and on-going support) |
Production System Operational |
Expense |
Complete Payments | Paid Invoices | Expense |
Close Contracts |
Closed Orders |
Expense |
Settle Costs to Asset |
Capex Settled |
Expense |
Post-Implementation Review |
Signed PIR Report |
Expense |
Close Project | Project Closure in FMIS System |
Expense |
Insurance | Ongoing operating cost |
Expense |
Benefit Realisation Review |
Approved Report |
Expense |
Activity Description What is the activity that is undertaken at this Time? |
Deliverable What is it that is Produced by the Activity? |
Treatment Expense or Capitalise |
---|---|---|
Decommission costs |
Lead to disposal | Expense |
Overhead and/or other administration costs to process the disposal | Lead to disposal | Expense |
2. Leasehold Improvements and Buildings
Activity Description What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Architect/design/quantity surveyor fees - conceptual plan, designs, and rework |
Expense |
Architect/design/quantity surveyor fees/acquisition due diligence - final work which can be directly linked to the leasehold fit out. E.g. floor plans related to the final design. Must be final work | Capitalise |
Project manager salaries and administration costs associated with non University of Auckland employees |
Expense |
Requests for information, requests for proposal and requests for quote |
Expense |
Scoping, research, feasibility, evaluation studies and pre-design costs |
Expense |
Design and other work which is superseded i.e., does not form part of the final fit out |
Expense |
Legal costs |
Expense |
Environmental court costs |
Expense |
Resource hearing costs |
Expense |
Costs incurred for unoccupied buildings (e.g. rent, electricity and rates) – generic overhead |
Expense |
Site review and preparation (audit of sites) to determine suitabilit |
Expense |
Prior fitouts that have not been fully depreciated |
Expense |
Activity Description What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Construction delivery |
Capitalise |
Window coverings |
Capitalise |
Installing customised fixture and fittings (e.g. lighting) |
Capitalise |
Wiring |
Capitalise |
Fire protection | Capitalise |
Floor coverings | Capitalise |
Partitioning | Capitalise |
Joinery | Capitalise |
Plumbing | Capitalise |
Security Systems | Capitalise |
Built in furniture (which cannot be removed) |
Capitalise |
Other costs incurred by employees that can be directly attributed to the leasehold improvements (e.g. travel, mobile and laptop charges, and protective equipment, for capital delivery staff) |
Capitalise |
Standard resources consent application fees and council fees |
Capitalise |
Utility cost incurred as a result of the fitout |
Capitalise |
External landscaping and planting, and exterior walls changed (leasehold related) |
Expense |
Defects testing and management | Capitalise |
Activity Description What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Supplies (e.g. toilet, kitchen, bathroom) |
Expense |
Relocation, transport, and storage costs |
Expense |
Opening/launch functions, including pōwhiri ceremony, and Koha |
Expense |
Change management - costs of personnel time (internal and external) to modify organisational structures, undertake HR change management and communications | Expense |
Activity Description What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Project manager salaries and administration costs associated with other non University of Auckland employees |
Expense |
Insurance |
Expense |
Repairs, maintenance, repainting |
Expense |
Subsequent or minor assets (under threshold limits) e.g. water cooler, first aid equipment, civil defence equipment, artwork, supplies, kitchen equipment, fridges, ovens, dishwashers, waste disposal, plants |
Expense |
Activity Description What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Project manager salaries and administration costs associated with non University of Auckland employee |
Expense |
Fit outs not fully depreciated when building is exited |
Expense |
Restoration costs on exit of building (lease makegood) |
Expense |
Demolition costs (if separately identifiable) |
Expense |
3. Website Costs
Activity What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Undertaking feasibility studies | Expense |
Defining hardware and software specifications |
Expense |
Evaluating alternative products and suppliers |
Expense |
Selecting preferences |
Expense |
Activity What is the activity that is undertaken at this Time? | Treatment Expense or Capitalise |
---|---|
Purchasing or developing hardware | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Purchasing or creating content (other than content that advertises and promotes an entity’s own services and products) | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Obtaining a domain name | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Developing operating software | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Developing code for the application | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Installing developed application on the web server | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Stress testing | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Designing the appearance of web pages | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Creating, purchasing, preparing (e.g. creating links and identifying tags), and uploading information | Capitalise (If directly attributed to preparing the websiteto operate in the manner intended by management |
Professional services for taking digital photographs of an entity’s own products and for enhancing their display | Expense |
Advertise and promote an entity’s own services and products (e.g. digital photographs of products) | Expense |
Activity What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Clearly identified inefficiencies and initial operating losses incurred before the web site achieves planned performance (e.g. false start testing) |
Expense |
Training employees to operate the web site | Expense |
Selling, administrative and other general overhead expenditure unless it can be directly attributed to preparing the web site to operate in the manner intended by management | Expense |
Activity What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Updating graphics and revising content |
Expense |
Adding new functions, features, and content | Expense |
Registering the website with search engines |
Expense |
Analysing usage of the website |
Expense |
Reviewing security access |
Expense |
Backing up data | Expense |
Activity Description What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Decommission costs |
Expense |
Disposal of website information and records, transfer data. | Expense |
Appendix 4 – SaaS Decision Flow
3. SaaS Related Arrangement
Activity Description What is the activity that |
Treatment Expense or Capitalise |
---|---|
Development of business case and project plan |
Expense |
Research in evaluating software options |
Expense |
Document and analysis business processes and requirements |
Expense |
Business case preparation |
Expense |
Selection of a provider (procurement) |
Expense |
Activity Description What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Installation, configuration, customisation, and setup of purchased or leased infrastructure, or on-premises system. |
Capitalise |
Configuration and setup of provider offerings and customisation of provider application software’s existing code to function in a specified way. (Including all personnel costs and professional fees)
(Please note: the contractual restrictions requiring the customer to obtain the services from the SaaS provider do not alter this assessment.)
|
|
Any software, application or intellectual property that does not belong to the Faculty/Service Division, or any newly developed code for which the provider obtains the IP rights. | Expense |
Additional software, applications, modules, or code developed and controlled by the Faculty/Service Division, which the Faculty/Service Division has the power to obtain future benefits, and to restrict others access to these benefits (regardless of who hosts the applications developed). | Capitalise |
Modify provider offerings, or development of bridging modules (or API) to existing on-premises systems or bespoke additional capability. Where Faculty/Service Division controls the IP over any code written for the modification of existingor development of new on premises software. | Capitalise |
Testing of Faculty/Service Division on-premises bespoke software, or the Faculty/Service Division owed bridging application. |
Capitalise |
Testing SaaS application under a SaaS arrangement, where the SaaS contract conveys to the Faculty/Service Division only a right of access |
Expense |
Data migration activities: including purging or cleansing of existing data, reconciliation or balancing of the old data and the data in the new system, creation of new or additional data, and conversion of old data to the new system. |
Expense |
Purchased data conversion software (if only used for a single project, the useful life maybe relatively short). |
Capitalise |
*A third part may in substance be a subcontractor of the supplier:
- The supplier has some say or instructs how the work by the 3rd party is performed.
- There is a tripartite agreement between the client, supplier, and third party.
- If the supplier identified the specifications and scope of work by the third party.
- The supplier is primarily responsible for the services the third party performs.
Activity What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Staff training on project delivery or communication and associated costs (e.g. rooms and Trainer’s time) |
Expense |
Development of business processes |
Expense |
Purchase / development of training materials, e-learnings, and user manuals |
Capitalise |
Activity What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Ongoing maintenance and testing activities |
Expense |
Additional charges for data storage, pre-build connectors, change in license tier |
Expense |
Ongoing access to SaaS licence, hosting fee, and consumption cost |
Expense |
Activity What is the activity that is undertaken at this Time? |
Treatment Expense or Capitalise |
---|---|
Decommission costs | Expense |
Overhead and/or other administration costs to process the disposal. | Expense |