3000 Types of Property
DFPS Asset Management Handbook February 2011
Property is divided into five basic categories:
• capitalized;
• controlled;
• locally controlled;
• leased under capital leases; and
• leased under operating leases.
3100 Capitalized Property
DFPS Asset Management Handbook February 2011
Capitalized property must be tracked in the SPA and DFPS’s HHSAS property accounting system. Capitalized property includes, but is not limited to:
• vehicles;
• machinery;
• equipment;
• software developed or obtained for internal use; and
• all other tangible or intangible property that is used in operations and has an estimated life of greater than one year.
Standard capitalization thresholds for capitalizing property (generally over $5000) have been established for each property class and are detailed in SPA. For purposes of the annual financial report, DFPS complies with the property accounting system’s capitalization and depreciation policies and thresholds.
3200 Controlled Property
DFPS Asset Management Handbook February 2011
Controlled property includes furniture and equipment that has a unit cost greater than $500 and less than $5,000, and is on the Comptroller’s controlled asset list (see Appendix C).
This property must be tracked in the SPA via DFPS’s HHSAS property accounting system.
3300 Locally Controlled Property
DFPS Asset Management Handbook February 2011
Locally controlled property:
• is not on the comptroller’s controlled asset list;
• does not meet the cost threshold for a controlled or capitalized asset;
• is not acquired under an operating lease; and
• is being tracked at the request of DFPS management in the SPA via DFPS’s HHSAS property accounting system and will be assigned a unique asset ID number.
3400 Leased Property
DFPS Asset Management Handbook February 2011
Property acquired through leases may be capital or operating. All property must be tagged and tracked that is acquired under a capital lease, master equipment lease, or purchase program lease. The director of the DFPS Asset Management unit (or designee) will be included in all contract negotiations or procurements (including amendments to existing contracts) involving acquisitions of assets.
Each lease agreement must be reviewed during negotiations to determine if it is a capital lease or an operating lease. If determined to be an operating lease, the DFPS Asset Management unit determines which equipment will be tagged and tracked.
3410 Leased Under Operating Leases
DFPS Asset Management Handbook February 2011
All leased seat management equipment is considered operating leased equipment. This property is not tracked via the HHSAS inventory system.
3420 Leased Under Capital Leases
DFPS Asset Management Handbook February 2011
DFPS discourages capital leases as defined by Generally Accepted Accounting Principles (GAAP). Divisions wishing to acquire property under a capital lease will contact the DFPS Accounting office for guidance.
If a lease agreement appears to be capital, as defined by GAAP, an amortization schedule must be requested in the invitation to bid, and specified as a deliverable item in the purchase order. Purchasing documents must clearly indicate that the agreement is a capital lease.
Property acquired through lease agreements that meets capital lease requirements under GAAP is capital property and is accounted for in the same manner as other capital property of the agency.
To be a capital lease, the lease must be non-cancelable and meet one or more of the following criteria:
• The lease transfers ownership of the property to the lessee by the end of the lease term.
• The lease term is equal to 75 percent or more of the estimated economic life of the leased property.
• The present value of the minimum lease payments at the inception of the lease, excluding executor costs, equals at least 90 percent of the fair value of the leased property.
• A bargain purchase option (DFPS does not allow bargain purchase options).
The value of property acquired under a capital lease is the lesser of the fair market value of the property and the present value of the minimum lease payments.