12.1.10 Determine Capitalization Thresholds
Policy Statement
The University of Illinois System capitalizes all property and equipment that, in general, have a useful life of more than one year and a unit value equal to or greater than the capitalization thresholds.
Reason for the Policy
State regulations and Governmental Accounting Standards require capitalization of property and equipment based on dollar thresholds which vary by asset type.
Applicability of the Policy
All University of Illinois System equipment belonging to the system and State of Illinois.
Procedure
Capitalization means to classify the cost of an item as a long-term asset as the item will be used over a period of time. Therefore, the cost is not charged against the earnings of one fiscal year as part of day-to-day operations and instead is charged over several years.
To determine capitalization thresholds:
- Consult 12.1.2 Classify Equipment and Property to determine the classification of equipment or property.
- Consult 12.1.4 Determine the Value of Equipment or Property to determine how to value equipment or property.
- Review the information below to determine capitalization thresholds. Click on a link to open or close it:
Moveable Equipment
Moveable equipment is capitalized if its value is $5,000 or more.
Collections
Inexhaustible collections are not capitalized unless they were already capitalized as of June 30, 1999, when new accounting guidelines went into effect. If a collection qualifies for capitalization, it is capitalized regardless of its value.
Exhaustible collections follow moveable equipment capitalization thresholds for the collection as a whole.
Intangible Assets
Intangible assets (software, trademarks, patents, easements, and copyrights) are capitalized if purchase or development costs are $250,000 or more. Software and other intangible assets are not subject to capitalization if they are to be leased or sold, used in research and have no alternative uses, or are developed for others under contractual arrangements.
Real Property
Land
Site Improvements—Material and identifiable site improvement costs must be recorded as a capital asset if the improvement total is $250,000 or more. Immaterial or unidentifiable site improvement costs are either expensed or capitalized as part of building or infrastructure project costs.
Buildings
All buildings are capitalized if the cost is $250,000 or more.
Remodel/Renovation—Repairs and maintenance are always expensed. A remodeling or renovation project costing $250,000 or more may be capitalized if it meets one of the following three criteria:
- Significantly increases the efficiency, usefulness, or service life of a building.
- Involves enhancing or replacing something within the existing structural "footprint" (foundation/number of floors, i.e., gross square footage) of a building.
- Involves an Energy Service Company (ESCO), as described in the Public University Energy Conservation Act (110 ILCS 62), where energy and/or operational cost savings over time are guaranteed, and the contractor/ESCO is obligated to pay the difference if future savings fall short of the guarantee.
The cost of building components removed during renovation is considered fully depreciated. Therefore, an asset's original recorded value is not adjusted for the historical cost of elements removed. Consequently, no effort is made to value and adjust for the cost of components removed during renovation/remodeling.
Replacements—Costs incurred to replace elements of existing assets are capitalized or expensed according to the type of property and its capitalization threshold.
Infrastructure
Infrastructure is capitalized if a project's total cost is $1,000,000 or more.
Policy Information
First Published
June 2011
Last Updated
March 2025
Last Reviewed
March 2025