What is a Capital Asset?

Capital assets, comprising tangible properties, such as land, buildings and equipment, and intangible properties, are identifiable assets that meet all of the following criteria:

1. Are held for use in the provision of services, for administrative purposes, for production of goods or for the maintenance, repair, development or construction of other capital assets;
2. Have been acquired, constructed or developed with the intention of being used on a continuing basis;
3. Are not intended for sale in the ordinary course of operations; and
4. Are not held as part of a collection” ¹

At the University of Toronto, all purchases that fall under the above definition and have a life expectancy greater than one year and a value of $5,000 or more (excluding related costs, e.g. freight and taxes) are considered capital assets. This definition is applicable regardless of whether the purchase was funded by operating, ancillary, capital or restricted funds.

Departments are required to record and track capital asset purchases at or above the $5,000 threshold. Divisions can have a different threshold for tracking capital assets as long as this threshold does not exceed $5,000. For instance, laptop computers generally can be purchased for less than $5,000, yet control of this asset should not be ignored because it may fall beneath the University threshold for recording of capital assets.

Departmental Capital Asset Records

The University currently does not maintain capital asset listings centrally. Departments are required to maintain a record, or inventory, of capital assets to facilitate management and audit requirements.

As a minimum, capital asset records should identify the cost and location of all assets owned by the University, and those held in trust. The following information relating to the purchase of capital assets should be captured by the department:

• FIS document number
• department, i.e. the custodial department
• room number, if applicable
• quantity
• source of funds:
  • commitment fund centre
  • fund
• unit cost
• total cost
• description
• model # where included on the invoice
• serial # where included on the invoice
• Operation Property ID number, if applicable
• STOP Theft plate number, if applicable

This information is essential to managing the optimal use of available assets within a business unit, and may be the key to identifying and verifying theft.

A department should consider the Operation Property ID program for engraving high risk items. It is operated by the University of Toronto Police, 978-2323. In addition, the department should consider attaching serialized plates to devices being protected, as part of the STOP Theft program.

Disposal of Capital Assets

Disposals refer to capital assets where title has been transferred to a party outside the University by way of sale, trade in or gift, or removed from service due to obsolescence, scrapping or dismantling. Departments play a key role in ensuring that all disposals are reflected in the University’s annual financial statements.

The following are general requirements with regard to the disposal of capital assets:

• Identify items at least once a year that are still located in the department but are no longer in use by the department.
• Identify items which are no longer in the department. These could include:
  • items which have been disposed but the disposal was not reported, or
  • items sold internally and now located in another University department.
• Remove disposals from departmental capital asset records.

The section on Transfer of Capital Assets to Another University in situations where a researcher is relocating to another Canadian university and requests authorization to transfer equipment which they are currently using in their research, to that university.

¹ CICA Handbook

Disposals include the following transactions:

• the transfer of title to a party outside the University by way of sale, trade-in or gift, or
• the removal of assets from service due to obsolescence, scrapping or dismantling

The purpose of the University’s disposal policy is to ensure that:

• there are no disposals of assets when these assets could be put to good use elsewhere within the University,
• fair value is received for disposals, and
• the allocation of proceeds on disposal is addressed.

The following requirements contribute to meeting policy objectives:

• approvals are directed toward consideration of fair market value, conflict of interest and allocation of proceeds
• independent approval of the sale price (proceeds) of assets for disposal

This section covers the application of these requirements at the University, and deals with disposals of all University capital assets, funded from any source, including land, buildings, furniture, equipment, books, artwork and other assets.

See the section Internal Sales of Capital Assets or transfers of capital assets to another University of Toronto department.

See the section Transfers of Capital Assets to Another University, for the transfer of research equipment to another university.

Approval of Disposals and Allocation of Proceeds

Valuation and Allocation of Proceeds

Swap Shop

Procedure 

Approval of Disposals and Allocation of Proceeds

Disposal Category	Approvals
Disposal to a staff member or a relative of a staff member or  Proceeds are less than fair market value	One of a Vice-President, Assistant Vice-President, Vice-Provost and  Chief Financial Officer
Original cost less than $70,000 and  Fair market value less than $7,000	Principal, Dean, Director, Chair or Head of Administrative Department and  Controller and Director of Financial Services
(Fair market value is $270,000 or less and  Original cost is $70,000 or greater)OR Fair market value is $7,000 to $270,000	One of a Vice President, Assistant Vice-President, Vice-Provost and Chief Financial Officer
Fair market value in excess of $270,000 and not greater than $5.0 million	President (reported to the Business Board for information)
Fair market value greater than $5.0 million	Business Board

Minimum Approval
Notwithstanding the approvals specified above, all disposals require the approval of at least one level of authority higher than the person requesting the disposal, i.e. the person requesting the disposal must obtain the approval of the person to whom he or she reports.

Original Cost Not Available
Where the original cost cannot be determined, the determination of the required approval is made with reference to the fair market value.

See Policy on Disposal of Capital Assets and Allocation of Proceeds of Disposition (including Regulations).

The information in this section expands and clarifies the requirements within the policy. 

Valuation and Allocation of Proceeds

Valuation
The fair market value must be determined for all disposals of capital assets as a prior condition of approval. The Director of Procurement Services has the authority to determine the fair market value for all disposals and will consult with University experts where appropriate.

Allocation of Proceeds
Allocation of proceeds refers to the planned use of the proceeds and is approved concurrent with the approval of the disposal.

Accounting for Proceeds
Regardless of the approved allocation of proceeds, the proceeds of the sale of capital assets represent a recovery of the original expenditure and should be so recorded in the accounts.

Operating fund – If the original expenditure was made with Operating Funds, the proceeds should be credited to an expense recovery account in the Operating Fund.

Trust funds – Proceeds from the sale of capital assets purchased from a trust fund should be recorded as an expense recovery (reduction of expenses) in that trust fund.

Research, contracts and other restricted funds – Proceeds from the sale of capital assets purchased from a Restricted Fund other than trust funds would be credited to either the Operating Fund or a Restricted Fund, at the discretion of the department.

Other – Proceeds from the sale of capital assets purchased from Capital Funds, if the source of funds for the original purchase is not known, or if the fund is closed, may be credited either to the Operating Fund or a Restricted Fund, at the discretion of the department.

Information on the source of funds for the original purchase should be available in the capital asset listing maintained by the department.

Swap Shop

A department with redundant assets with a fair market value of $200 or less can dispose of these assets at the Swap Shop by completing the Swap Shop Disposal Form in place of the Capital Asset Disposal Form. The Swap Shop Disposal Form only requires the signature of the department head, which reduces the number of approvals required for the disposal of low-valued assets to the Swap Shop. The idea is that these assets would be available for other University departments, student use on campus etc. at no cost. The director of Procurement Services can assist in determining the asset value.

The Swap Shop will receive the asset from the department, and sign the Swap Shop Disposal Form. After obtaining the signature, including the signature of the department head, the department should forward the completed form to:

Financial Services Department
215 Huron Street
2nd Floor

For more information on the Swap Shop, refer to their web site at:

http://www.fs.utoronto.ca/recycle/swap.htm

Procedure

For step by step instructions for the disposal of Capital Assets, refer to Procedures for Disposals or Internal Sales of Capital Assets .

When the custodian of University furniture or equipment no longer requires the item, the custodian should consider redeployment within the University, i.e. an internal sale (or gift):

• within the custodian’s department
• within the custodian’s faculty or division
• elsewhere in the University

Steps to find an internal user or buyer should always be undertaken prior to proceeding with an external sale.

Though not disposals, internal sales generally involve the same considerations:

• The price, if any, should be determined with reference to fair market value
• the proposed use of the proceeds, if any, should be identified and approved

This section addresses these considerations.

Considerations

Approvals of Internal Sales

Procedure

Considerations

Redeployment within the Department or Faculty
As noted in Capital Assets Overview, sound management of capital assets by departments and faculties should include a mechanism for identifying surplus assets to the current custodian, and redeploying those assets to their most effective use within the department or faculty.

Units will vary in their approach to this matter. However, the requirement for approval of internal sales by the head of the department, and by the head of the faculty when the buyer is outside the faculty, provides an opportunity for appropriate considerations.

Fair Market Value 
Where the assets are being sold internally, i.e. provided at a price, there is a requirement to determine the fair market value. The primary objective is to ensure that the price does not exceed the fair market value. The Director of Procurement Services will determine/approve the fair market value, as detailed in the Procedures for Disposals or Internal Sales of Capital Assets.

Approvals of Internal Sales

Category of Internal Sale	Approvals
Sale within a department and sale between two departments within the same faculty	Chair of the selling department
Sale between two departments in different faculties	Chair of the selling department and Dean of the selling faculty

Procedure

The form and procedure for processing internal sales of capital assets are the same as for the disposal of capital assets, with the following exceptions:

• the selling department prepares and processes a journal entry to record the transaction, rather than a U of T invoice,
• If the original cost of the asset was $5,000 or more, the buying department adds the asset to its capital asset records

Refer to Procedures for Disposals or Internal Sales of Capital Assets for step by step instructions for the internal sale of capital assets.

Use of Capital Assets Away from University Premises

Use of University equipment at locations other than University premises occurs with some frequency. The most common examples are personal computers, laptops, cameras, projectors and portable printers/scanners.

As part of its program of control over its assets, the University requires that such use be authorized and documented in respect tofurniture, equipment and other removable assets worth more than the internal policy self-insurance deductible (currently $2,500), except library books which are covered by separate library policies.

Detailed Requirements

Procedure

Detailed Requirements

Authorized Use
Authorization to use University equipment away from University premises is limited to the following:

• to faculty and staff in support of their employment responsibilities
• to University students in support of authorized student projects
• to other parties or organizations for University purposes, including facilitation of the exchange of ideas or for mounting exhibits or other events

Faculty/Departmental Limits
The University requirements apply only to equipment worth more than the internal self-insurance deductible which is currently $2,500. However, faculties and departments are free to set lower limits.

University Premises
Use away from University premises includes use at any location other than those listed in the University telephone directory.

Approvals

• Dean, chair, director of an institute or centre or head of an administrative department with custody of the capital asset
• Minimum level of approval: one level of authority higher than the person using the asset

Procedure

1. The department completes parts A through C of the Use of Capital Asset Away from University Premises form to document all use of equipment away from University premises.
2. The department retains the form in an open file until the asset is returned.
3. The authorized user safeguards the asset throughout use away from University premises.
4. The department establishes procedures for periodic reporting to the head of the unit. Assets not returned by the expected date of return noted in section B of the form should be highlighted.
5. Where use away from University premises is required beyond the authorized date, the authorized user must obtain additional authorization.
6. The department must maintain up-to-date records, including recording authorized use extensions.
7. The authorized user returns the asset in satisfactory condition to the University when use is completed, or as requested by the University.
8. The department ensures that assets are returned immediately in the case of University faculty/staff who are terminating employment, or students who are terminating enrolment, at the University.
9. Upon return of the asset, the department completes Part D of form and retains the form on file.
10. If the asset is not returned in satisfactory condition, the department should assess the existence of negligence or misuse of the asset. If there was negligence or misuse, steps should be taken to recover the amount of the loss (up to the amount of theinternal policy self-insurance deductible of $2,500) from the authorized user who was responsible for negligence or misuse.

Last revision December 2006

Researchers relocating to another Canadian university may request authorization to transfer equipment which they are currently using in their research, to that university.

 

Approvals

Principal, Dean or Director and one of:

• Vice-President & Provost,
• Vice-President, Research and Innovation, or
• Chief Financial Officer

Procedure

Researcher Completes Form
The researcher completes the Research Equipment Deletion Advice Form:

1. obtains the required written confirmation from the transferee university, which includes:
   • the researcher’s appointment with the university,
   • that the equipment will be employed in on-going research, and
   • that the university will pay all transportation and related costs.
2. forwards with the completed form to the Principal, Dean or Director.

Principal, Dean or Director Approval
The University recognizes a general responsibility to facilitate ongoing research anywhere in Canada, as well as the fact that equipment grants are made in relation to the individual researcher’s application. Such requests, therefore, should be evaluated in this context and on the basis of whether the equipment transfer will seriously interfere with on-going research at the University of Toronto. Once the Principal, Dean or Director has approved the form, forward the form to one of:

1. Vice-President & Provost,
2. Vice-President, Research and Innovation, or
3. Chief Financial Officer

Forward Completed Form to FSD
When all approvals have been obtained, forward the form to:

Financial Services Department
215 Huron Street
2nd Floor
Toronto, ON M5S 1A2

Retain Copy
Department / faculty retains a copy of the completed form.

Last Revision April 2008