Management Accounts
Depreciation Policy

The University’s financial policy is as follows:

Equipment, including software, costing less than £10,000 per individual item or group of related items is charged to the profit and loss account in the year of acquisition.  In other words, low value purchases are charged directly to the specified cost centre when processed.

All other equipment is capitalised, i.e. there is no charge to the profit and loss account in the year of acquisition but 25% of the cost is charged to the profit and loss account for each of the next four years, this is recorded as depreciation of the asset. This treatment spreads the cost of high value purchases over their expected useful life in order to provide more accurate financial accounts.

Depreciation is charged directly to the Faculties and Departments that own the assets.

In summary:

1)     Items of equipment costing less than £10,000 – these are charged to analysis code 22600. These are treated as recurrent; funding is included in the core teaching element.

a)     Expenditure will be charged to the profit and loss account in the current year.

2)   Items of equipment costing £10,000 or more – these are charged to analysis code 25600 & are treated as capital; Faculties are invited to bid for funding through the Corporate Planning process.

a)     Expenditure will be recorded against the appropriate cost centre during the year and will be cleared out to zero at the year-end resulting in no charge to the profit and loss account in the current year. However, during the following four financial years a monthly depreciation charge will be made to the Faculty or Department owning the asset, this will be included under recurrent expenditure. For example, an item of equipment costing £50,000 bought during 2005/06 will be charged against the Faculty or Department capital budget. For the years, 2006/07 and the next three years, depreciation will be charged against the Faculty/Department recurrent budget at £12,500 per annum.

3)     There will be no additional recurrent budget allocation for the depreciation charge.

4)      This treatment allows closer harmonisation between the Faculty income and expenditure accounts and the University’s overall financial statements and will allow financial managers to extract more meaningful financial information relating to their areas.  Performance will not be affected by major asset purchases during any particular year and they will be able to monitor the return generated by the capital at their disposal.

NB: For information on the fixed asset register please refer to the Financial Management web page.

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