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PMM 1.3 Capitalization of Land, Buildings, Infrastructure, and Public Art

Last Revised Date:
July 1, 2026
Responsible Unit(s):
Capital Finance
Responsible Unit Email(s):
FNSV-Capital-Finance@arizona.edu
Manual:
Property Management Manual
Status:
Active

Purpose and Summary

To provide direction to University departments on fixed asset capitalization policies of the University.

Scope

This policy applies to all University locations and units, including all University extensions, satellite locations, and off-site campus units, both domestic and international.

Policy

  1. Acquired and donated fixed capital assets are classified into the following categories:
    1. Land
    2. Land Improvements other than buildings
    3. Buildings
    4. Leasehold Improvements
    5. Utilities
    6. Telecommunications Network System
    7. Sport Facilities
    8. Public Art
    9. Construction in Progress
  2. All capital assets acquired with University, government or other sponsor funds shall comply with the University's procurement procedures.
  3. The threshold for capitalization of acquired, constructed, or gifted fixed capital assets is $100,000. Building and facilities improvement projects that are less than $100,000 should be booked using the Repair & Maintenance Services range of object codes (3510 – 3780). See the Finance & Budget Expenditure Object Code Detail for further information.
  4. When determining capitalization value, the scope of ALL work being done within the same timeframe and within the same facility should be evaluated. Even if individual components of the project may not be above $100,000, the collective total might and could warrant capitalization. If you are unsure, please reach out to FNSV-Capital-Finance@arizona.edu for support.

  5. LAND

    Land is acquired by the University through the following methods and is valued accordingly:

    1. Acquisition by Purchase - Land purchased by the University is recorded at cost. Cost includes the purchase price paid, legal costs, title costs, broker’s fees and other costs to provide an unencumbered title to the Arizona Board of Regents, for and on behalf of the University of Arizona.
    2. Acquisition by Gift or Bequest - Recorded at the value shown on the gift report. (An appraisal may or may not be attached.) 
    3. Acquisition through Eminent Domain - Land acquired by the university through court award is recorded at cost. Cost includes court award to the landowner(s), court costs, legal fees, appraisal cost, title cost and other costs to provide an unencumbered title to the Arizona Board of Regents, for and on behalf of the University of Arizona.
  6. LAND IMPROVEMENTS OTHER THAN BUILDINGS:
    1. This category consists of land improvements outside the building, except utility improvements. It includes roads, curbs, walkways, parking lots, streetlights, landscaping, wells, irrigation systems, drainage systems, fences, retaining walls, campus boundary signs, campus directional signage, and similar items.
    2. Use capital expense object code 7140 - Infrastructure.
  7. UTILITIES:
    1. This consists of the basic utility infrastructure outside of buildings. It includes the lines, tunnels, piping, transformers, relays, pumps, cables, switching stations, and similar items need for electrical, water, telephone, natural gas, television, data services, and central HVAC plants.  Excludes telecommunications network system components purchased and installed by UITS telecommunications and capitalized separately to the University's telecommunications network system or as building improvements.
    2. Use capital expense object code 7140 - Infrastructure.
  8. TELECOMMUNICATIONS NETWORK SYSTEM:
    1. Consists of the power conduit, cabling/wiring, electronics, and the telecommunications switching equipment and components necessary for the campus-wide delivery (both between buildings and within buildings from floor to floor) of electronically transmitted communications, principally voice (telephones) and data (computers), where such equipment and components are purchased and installed by UITS Telecommunications and when such equipment is NOT capitalized as a sub-component of either:  1) a new building construction project; or 2) a building improvement/renovation project; or 3) a utility improvement/renovation project; or 4) is expensed to operations and maintenance of plant as a sub-component of a building or utility improvements/renovation project when total cost falls below the capitalization threshold.
    2. All improvements to the telecommunications network system, as defined above, are capitalized as an aggregate addition by depreciable component to the telecommunications network system. 
    3. Capitalized from capital expense object codes 7160, 7161, 7162, and 7163; for use only by UITS-Telecommunications.
  9. BUILDINGS AND SPORTS FACILITIES:
    1. NEW CONSTRUCTION includes the creation of a new permanent structure or the addition, expansion, or extension of an existing building. The cost of the building is the construction cost of the building shell and its components.
      1. Use capital expense object code 7120 - Buildings.
    2. SPORTS FACILITIES includes additions, expansions, extensions of existing athletic Fields, tennis courts, seating and small facilities structures. (Bathrooms, storage, etc.) The cost of sports facilities is the construction and component cost.
      1. Use capital expense object code 7150 - Sports Facilities.
    3. CONSTRUCTION COST: Examples of construction costs include, but are not limited to, architects and engineering fees, site preparation, including demolition costs, building permit fees, contractor and sub-contractor fees, building materials, construction equipment rental, construction supplies and utilities, construction equipment operating and maintenance cost, and wages and benefits, as compensation for construction work performed.
    4. BUILDING COMPONENTS: Consists of items permanently affixed/installed to the building shell, necessary for the building to be used as intended, which are integral to the building and cannot be removed without damaging the building. Examples include, but are not limited to elevators, HVAC, plumbing system, electrical wiring, fixed theater or classroom seating, telecommunication/data wiring, fire alarm and sprinkler systems, and other fixtures and equipment installed with the intent of permanent use in the building.

  10. REMODELING AND BETTERMENTS vs. MAJOR MAINTENANCE AND REPAIRS

    1. REMODELING, BETTERMENTS, AND RENOVATION: The reworking of an existing building or portion of an existing building, including upgrading the major systems, which extends the building’s usable capacity or useful life shall be capitalized. This includes the major replacement, or upgrading of building systems, components, or fixed equipment that is necessitated by facility obsolescence, change in use, code requirements, physical plant wear-out, and/or related interior space modifications and aesthetic improvements. Examples include but are not limited to demolition of the interior of a building or portion thereof including the removal and subsequent replacement of electrical, plumbing, ventilating and air conditioning systems, fixed equipment, floor coverings and interior walls and partitions (whether fixed or moveable). 
      1. Cosmetic remodeling, such as simple replacement of floor and wall coverings as part of a periodic redecorating, is a maintenance and repair activity. These costs shall not be capitalized, except when it is incidental to a remodeling, betterment and renovation project.
    2. MAJOR MAINTENANCE AND REPAIRS: The periodic need to repair and rework building and infrastructure systems or components to maintain the original condition of the asset. The expense should be classified as a repair and maintenance expenditure and charged to operations object code. Examples include, but are not limited to re-roofing, disassembling and rebuilding air-conditioning systems water chillers, replacement of worn-out heating systems, and other major components. This repair work does not usually make the building more useful or add to the estimated useful life of the building as a structure.
      1. Maintenance and repairs large enough to involve outside contractors are undertaken in the Unexpended Plant Funds. As the maintenance is completed, the expense is not added to that asset’s cost basis in the capital assets of the University. (Net Investment in Plant)

     

  11. LEASEHOLD IMPROVEMENTS:
    1. Improvements to land and buildings leased by the University. When a land and/or building lease is not renewed, the recorded cost of any leasehold improvements is written off from the university’s financial system.
  12. PUBLIC ART
    1. This category consists of the works of art (murals, frescoes, sculptures, fountains, mosaics, etc.) funded through the budget of any major building construction or renovation project or provided via donation. Major buildings are those with a total project cost of $10 million or greater. The funded amount for public art shall not exceed one-half of one percent (0.5%) of the construction or renovation budget.
    2. Public art is capitalized at purchase cost. Annually, Facilities Management is responsible to advise Capital Finance of the value of stolen, destroyed, and retired through Surplus Property. This value is deducted from the composite capitalized value of public art.
    3. Capital Finance records public art by building, but does not tag, or inventory public art. Inventory and control of public art are the responsibility of Facilities Management or the associated department maintaining the public art in lieu of Facilities Management.
  13. CONSTRUCTION IN PROGRESS:
    1. Construction projects accounted for in the Plant Fund are initially capitalized to Construction in Progress. Subsequent treatment of the expenditures depends on the basic nature of the work done. Where a project involves both a capitalized and non -capitalized activity, such as a betterment along with maintenance to systems in the affected space, the accounting treatment shall be that of the predominant activity.
    2. New Building Construction is capitalized to object code 8730, Building, upon project completion.
    3. Building Additions resulting in an expansion, enlargement or extension to the useful life of an asset are capitalized to object code 8730, Building and Improvement when completed.
  14. SPECIAL CONSIDERATIONS:
    1. Combined Purchases: When a group of fixed assets is acquired together, the cost shall be allocated, as appropriate, among the individual assets based on a purchase price distribution schedule. That schedule will be generated by Capital Finance in consultation with Real Estate Administration and any other necessary parties to determine the appropriate breakout of value. An example of this kind is the acquisition of both land and buildings in a single transaction.

    2. Grouped Asset Purchases: Separately from combined purchases noted above, purchases of grouped assets that previously would not have been considered as capital purchases qualify if the total value of the purchase is greater than $200,000. This primarily comes up in the acquisition of furniture, fixtures, and equipment (FF&E) during large construction projects. Below is a practical way to view purchases to determine the treatment:

      Line Items in the DocumentObject Code Usage
      Individual movable items that exceed $5,000. (Conference tables, specialized filing cabinets, etc.)Movable Equipment Codes (76**)
      Items identified as being fixed in place and not subject to moving (Cubicle Systems, fixed cabinetry, compact shelving systems, etc.)Special Fixed Equipment (7470)

      All other items that do not meet either of the two prior categories that would not capitalize on their own.

      (Sofas, chairs, small tables and filing cabinets, etc.)

      If total value within the project exceeds $200k, Grouped CIP Equipment and Furnishings (7475)

      If total value in the project is under $200k, non-capitalized furnishings (5775)

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