DEPARTMENT OF AGRICULTURE
Property, Plant and Equipment
Office of the Chief Financial Officer
1 Purpose and Scope 1
2 Special Instructions/Cancellations 1
3 References 1
4 Policy 2
5 Definition 12
6 Responsibilities 16
Appendix A A-1
This regulation prescribes accounting
standards, policies, and procedures to be used to obtain uniform and reliable
financial control over property, plant and equipment (PP&E) at the U.S.
Department of Agriculture (USDA). The
PP&E accounting standards, policies, and procedures are applicable to all
agencies, staff offices, and the Working Capital Fund (WCF).
2. SPECIAL INSTRUCTIONS/CANCELLATIONS
This regulation revises Departmental
Regulation 2200-002 “Property, Plant and Equipment” dated December 24, 2003.
Agriculture Property Management Regulations
of Federal Financial Accounting Standards (SFFAS) Number 5, “Accounting for Liabilities of the Federal
of Federal Financial Accounting Standards (SFFAS) Number 6, “Accounting
for Property, Plant, and Equipment”
of Federal Financial Accounting Standards (SFFAS) Number 10, “Accounting for Internal Use Software”
of Federal Financial Accounting Standards (SFFAS) Number 29, “Heritage Assets and Stewardship Land”
of Federal Financial Accounting Standards (SFFAS) Number 35, “Estimating the Historical Cost of General
Property, Plant and Equipment”
Financial Accounting and Auditing Technical Release 5, “Implementation Guidance on SFFAS Number 10: Accounting for Internal Use Software”
Financial Accounting and Auditing Technical Release 9, “Implementation Guide for SFFAS 29: Heritage Assets and Stewardship Land”
Financial Accounting and Auditing Technical Release 14, “Implementation Guidance on the Accounting
for the Disposal of General Property, Plant & Equipment”
Real Property includes: land and interest in land; buildings; other
structures; additions to buildings; non-structural improvements; and fixed
agency will establish criteria for the control, security, valuation, supporting
documentation and tracking of real property, in accordance with the AGPMR.
agency will capitalize in its accounting records, a tangible real property
asset as follows:
and interest in land, regardless of value, cost or purchase price;
other real property assets when their useful life is:
more years; and
cost or established value, if donated, constructed, or obtained through other
agency activities, is $25,000 or greater; or
major improvement or betterment of an existing capitalized asset, when:
to the criteria in subparagraph b;
asset’s value is increased; or
its useful life
Property includes: equipment; furniture & fixtures; motor vehicles;
aircraft; hardware; and internal use software (IUS).
agency will establish criteria for the control, security, valuation, supporting
documentation and tracking of personal property in accordance with the AGPMR.
will capitalize in its accounting records each individual tangible component of
personal property, as tracked in the Personal Property System (PROP), or other
secondary personal property tracking system, when the following criteria are
is two or more years; and
cost or established value if donated, constructed, information technology (IT)
configured or obtained through agency activities is $25,000 or greater, except
for IUS which is $100,000 or greater.
may issue written directions to capitalize the acquisition of personal property
with a cost or value of less than $25,000 or for IUS less than $100,000 in the
costs would be materially distorted in a given reporting period by charging to
expense the acquisition of a large quantity of components that individually do
not meet the capitalization threshold criteria in paragraph (2).
Such items may be grouped in a separate asset
group account and capitalized;
component is procured and controlled within a WCF activity; or
authorized in writing by the Office of the Chief Financial Officer (OCFO).
Personal and real property can be capitalized
and accountable; non-capitalized and accountable (which includes sensitive
personal property); or non-capitalized and non-accountable.
and Depreciation/Amortization of General PP&E
is the rational and systematic method of allocating the cost of an asset over
its estimated useful life. Attached at
APPENDIX A, is a range of the estimated average life for common types of
capitalized assets. USDA uses the
straight-line method of depreciation/amortization with no salvage value. Depreciation starts when the asset is placed
in service and ends when the assets basis reaches zero. Amortization of IUS
begins when the software has been successfully tested. However, if the IUS is a
module that is dependent upon completion of other modules, the amortization of
that module should begin when both that module and the other modules have
successfully completed testing.
For example, equipment is purchased for
$50,000 and its estimated useful life is five years then:
of Asset = Depreciation
= $10,000 Depreciation per year
is considered placed in service when it is first available for service/use,
even if it was not used immediately.
For example, if a machine is acquired in
January, but was not placed in use until August, depreciation starts in January.
is considered retired from service when it is transferred from a program office
to the property office responsible for disposing Federal property.
Capitalized real and personal property will be
depreciated over the asset’s estimated useful life. Land is not depreciated.
The full cost to construct an asset (a building, IUS,
etc.), shall be recorded as construction-in-progress or internal-use-software
in development until the asset is completed and available for use. When the building and/or IUS are available
for use, the balance in the in-progress/in-development account shall be
transferred to the appropriate General PP&E account.
Each agency will report depreciation expenses for real
and personal property in their financial statements.
Any changes in estimated useful life shall be treated prospectively. The change shall be accounted for in the
period of the change and future periods.
No adjustments shall be made to previously recorded depreciation or amortization.
PP&E shall be recognized by USDA when:
title passes; or
upon delivery. Delivery or constructive delivery shall be
based on the terms of the contract regarding shipping and/or delivery. For
An order is placed with a vendor on
September 29, 2012. That order is not
delivered until October 5, 2012.
the above example, title passed when delivered to USDA in fiscal year 2013, not
2012. Therefore, USDA personnel shall
use the PP&E capitalization threshold in effect for fiscal year 2013.
PP&E acquired by a contractor on behalf of USDA (i.e.,
USDA will ultimately hold title to the PP&E), shall be recognized upon
constructive delivery, whether to the contractor for use in performing
contract services, or to USDA.
A lease is an agreement conveying the right to use
property, plant, or equipment (land or depreciable assets or both) usually for
a stated period of time. For accounting
and reporting purposes, there are two alternatives in classifying a lease.
The proper classification of a lease is determined by
the circumstances surrounding the transaction.
According to the Statement of
Federal Financial Accounting Standards (SFFAS) Number 6, “Accounting for
Property, Plant and Equipment,” if substantially all of the benefits and risks
of ownership have been transferred to the lessee, the lease should be recorded
as a capital lease. Otherwise, the lease
should be recorded as an operating lease.
Substantially all of the risks or
benefits of ownership are deemed to have been transferred if any one of the
following criteria has been met:
The lease transfers ownership to the lessee by the end
of the lease term.
The lease contains a written bargain purchase option.
The lease term is equal to 75% or more of the estimated economic life of the leased property,
and the beginning of the lease term does not fall within the last 25% of the
total economic life of the leased property.
The present value (PV) of the minimum lease payments at
the beginning of the lease term is 90%
or more of the fair value to the lessor, less any
investment credit by the lessor. This requirement cannot be used if the
lease’s inception is in the last 25% of the useful economic life of the leased
asset. The interest rate used to compute
the PV should be the incremental borrowing rate of the lessee, unless the
implicit rate is available and lower.
If the lease transaction meets the ownership and
written bargain purchase criteria in paragraph (f)(1)(b)(1
or 2), then the asset arising from the transaction is to be amortized
over the estimated useful life of the leased property.
If the transaction qualifies as a capital lease because
it met either the 75% of useful life or 90% of fair value to lessor criteria in paragraph (f)(1)(b)(3 or 4),
the asset must be amortized over the lease term.
over asset life
bargain purchase option
over asset life
% of fair value to lessor
over lease life
% of the estimated economic life
over lease life
improvements represent physical enhancements made to property by or on behalf
of the property’s lessee. The lessee’s
interest in the improvement is an intangible right to use and benefit from
during the term of the lease. When
allocating the cost of leasehold improvements to the periods benefited, the
expense is referred to as amortization (as used in amortization of intangibles),
Leasehold improvements in the form of buildings or
structural alterations are sometimes made on leased property or on interests in
real property. Such interests in real
property may include right-of-ways, permits, use agreements, water rights, or
easements. Additionally, the cost of all
leasehold improvements (e.g., carpeting, partitions, soundproofing of ceilings
and walls) that have a useful life greater than two years must be capitalized.
The amortization of leasehold improvements is the
lesser of the life of the improvement or the remaining term of the lease.
should be recorded at the fair value on the date of receipt plus any costs
incurred to place the donated item(s) in service. Such costs include title search or recording,
shipping, installation and rearrangement.
property loaned or furnished to others must be accounted for in the Department’s
Property Management Information System (PMIS).
Heritage Assets and Stewardship Land
Heritage assets are property, plant, and equipment that
are unique for one or more of the following reasons:
Historical or natural significance;
Cultural, educational or artistic (e.g., aesthetic)
Significant architectural characteristics.
assets are generally expected to be preserved indefinitely.
The cost of acquiring, improving, reconstructing, or
renovating heritage assets, other than multi-use heritage assets, shall be
expensed in the period in which the cost is incurred. The cost shall include all costs incurred
during the period to bring the item to its current condition, at its initial
No amounts for heritage assets acquired through
donation or devise shall be recognized in the cost of heritage assets. The fair value of the asset, if known and
material, shall be disclosed in the notes to the financial statements in the
year received. If fair value is not
known or reasonably estimable, information related to the type and quantity of
heritage assets received shall be disclosed.
Multi-Use Heritage Assets
A heritage asset shall be considered a multi-use
heritage asset if the predominant use of the asset is in general government
operations (e.g., the main Treasury building, which is a heritage asset, used
as an office building).
Depreciation and Recognition
The cost of acquisition, betterment, or reconstruction of
all multi-use heritage assets shall be capitalized as general PP&E and
depreciated over the assets useful life.
Multi-use heritage assets acquired through donation or
devise shall be recognized as general PP&E at the asset’s fair value, and
the amount shall also be recognized as nonexchange
Stewardship land is land and land rights owned by the
Federal Government and not acquired for or in connection with other general
PP&E. Stewardship land is defined as
the solid part of the surface of the earth. Excluded from the definition are
materials beneath the surface (e.g., mineral deposits and petroleum), the space
above the surface (e.g., timber), and outer-continental shelf resources.
Examples of land not associated with other items of general PP&E include:
Land used as forests and parks; and
Land used for wildlife and grazing.
General PP&E may be built on existing Federal
lands; however, the cost of the land may not be identifiable. In these instances, general PP&E shall
include only land or land rights with an identifiable cost that is specifically
acquired for or in connection with construction of general PP&E.
Depreciation and Recognition
The acquisition cost of stewardship land shall be
expensed as a cost in the period incurred. The cost shall include all costs incurred to
bring the PP&E to its current condition
Any costs to prepare stewardship land for its
use (e.g., razing a building) shall be expensed as part of
the cost of stewardship land.
In some cases, land may be acquired along with existing
structures. The following treatments may
If the structure is significant in and of itself, the
agency shall use its judgment as to whether the acquisition cost shall be
treated as the cost of stewardship land, heritage asset, or both;
If the structure is to be used in operations (e.g., as
general PP&E), but (1) the value of the structure is insignificant as
compared to the value of the land, (2) it has little or no inherent value,
and/or (3) it is merely a byproduct of the acquisition of the land, the cost
shall be treated as an acquisition of stewardship land in its entirety; or
Only significant structures, which have a significant
operating use, shall be treated as general PP&E by identifying the cost attributable
to general PP&E and segregating it from the cost of the stewardship land
No amounts for stewardship land acquired through
donation or devise shall be recognized as a cost on the statement of net
cost. Its fair value, if known and
material, shall be disclosed in the notes to the statement of net cost. If fair value is not estimable, information
related to the type and quantity of assets received shall be disclosed in the
In some instances, general PP&E may be transferred
to another Federal agency for use as stewardship land. The cost of stewardship
land transferred from another Federal agency shall be the book value of the
land recorded by the transferring agency for the asset, net of accumulated
depreciation or amortization. If the
receiving agency cannot reasonably ascertain the book value, the transfer shall
be disclosed in the notes, if material.
The cost of assets acquired through exchange will be
the fair value of the asset surrendered at the time of exchange.
If the fair value of the asset acquired is more readily
determinable than that of the asset surrendered, the cost will be the fair
value of the asset acquired.
If the fair value is not determinable, the cost of the
asset acquired will be the cost recorded for the asset surrendered, net of any
accumulated depreciation or amortization.
Any difference between the net recorded amount of the
asset surrendered and the cost of the asset acquired will be recognized as a
gain or loss.
or Removal of PP&E
In the period of disposal, retirement, or removal from
service, general PP&E shall be removed from the asset accounts along with
associated accumulated depreciation/amortization. Any difference between the book value of the
PP&E and amounts realized shall be recognized as a gain or a loss in the
period that the general PP&E is disposed of, retired, or removed from
General PP&E shall be removed from general PP&E
accounts along with associated accumulated depreciation/amortization, if prior
to disposal, retirement or removal from service, it no longer provides service
in the operations of the entity. This
could be either because it has suffered damage, becomes obsolete in advance of
expectations, or is identified as excess.
property used in the performance of a contract may be Government-furnished or
contractor-acquired. The physical
control and use of such property by non-government sources does not lessen the
responsibilities of USDA management to fulfill the legal and financial requirements
inherent with the ownership of the property.
In accordance with
this policy, USDA personnel must use available information for recording
property transactions and making adjustments to the appropriate accounts and
systems. This information includes such
items as shipping and transfer documents and/or other source documents prepared
for transfers between USDA and its contractors.
Accountable. Personal Property - All capital leases (this would
exclude operating leases for personal property) and all owned personal property
having an acquisition cost of $5,000 or more, and any item valued at less than
$5,000, but determined by an Agency Property Management Officer (APMO) to be
sensitive. Real Property - All owned real property with an
acquisition cost of $25,000 and above and all leased or assigned real
property. The real property
capitalization and accountability threshold is $25,000.
Acquisition Cost. Costs will include
all costs incurred to bring the asset to a form and location suitable for its
intended use to include: amounts paid to vendors, transportation charges to the
point of initial use, handling and storage costs, labor and other direct and
indirect production costs, architectural, engineering, and other outside
service charges for designs, plans,
specifications, and surveys; acquisition and preparation cost of buildings and
other facilities; an appropriate share of the cost of the equipment and facilities
used in construction work; the cost of fixed equipment and its related
installation; legal and recording fees and damage claims, the fair value of
facilities and equipment donated to the government; and material amounts of
Amortization. The periodic
charge to income that results from a systematic and rational allocation of cost
over the life of an intangible asset.
A provision allowing the lessee the option of purchasing the leased
property for an amount, exclusive of lease payments, which is sufficiently
lower than the expected fair value of the property at the date the option becomes exercisable.
Betterments. A major cost
incurred to extend or enhance the service potential (useful life potential) of
a tangible asset with a component having superior performance capabilities.
Expenditures. Costs incurred for new or used assets,
additions to existing assets,
or betterments or improvements to existing assets that are charged to asset accounts because
they add to the total service-rendering ability of the asset.
Capitalized. All property
meeting the following criteria: (1) be of a durable nature, (2) have a useful
life of two or more years once it is placed into service, and (3) its initial
acquisition cost must be $25,000 or more, except for IUS where the initial
acquisition cost must be $100,000 or more.
Capital Lease. Leases that
transfer substantially all the benefits and risks of ownership to the lessee.
Depreciation. The rational and systematic method of allocating the cost
of an asset over its estimated useful life.
Devise. A will or clause of
a will disposing of property.
Donated Property or
Non-reciprocal transfers of assets or services from state, local, or
foreign governments, individuals; or others not considered a related party to
the Federal Government.
The normal operating life in terms of utility to the owner.
Excess Property. Personal property
under the control of any Federal agency that is no longer required for that
agency’s needs, as determined by the agency head or designee.
Exchange. A reciprocal
transfer between government agencies that results in the acquisition of assets,
services, or the satisfaction of liabilities.
Fair Value. The assets selling
price in an arm’s-length transaction (sale) between unrelated parties.
Full Cost. The costs of
resources consumed that directly or indirectly contribute to an output, and the
costs of identifiable supporting services provided by other responsibility
segments within the reporting entity, and by other reporting entities. All direct and indirect costs to any part of
the Federal Government of providing goods, resources, or services.
Heritage Assets. Property, plant,
and equipment that are unique for one or more of the
following reasons: historical or natural significance; cultural, educational or
artistic importance; or, significant architectural characteristics.
The rate computed by the lessor and known to
the lessee at the inception of the lease.
The rate that, at the inception of the lease, the lessee would have
incurred to borrow over a similar term (i.e., a loan term equal to the lease
term) the funds necessary to purchase the leased asset.
Technology (IT) Equipment. Formerly known as Automated Data Processing
(ADP) Equipment, includes central processing units, peripheral input and output
devices, control units, and data entry machines.
Assets characterized by a lack of
physical substance. Examples include
patents and copyrights.
Software that is purchased from commercial vendors off-the-shelf,
internally developed, or contractor-developed solely to meet internal or
The IT unit or system that results from the integration of IT
components. Although the individual component costs may not satisfy the
capitalization threshold value, the final IT unit or system does satisfy the
Lease. An agreement
conveying the right to use property, plant, or equipment (land or depreciable
assets or both) usually for a stated period of time.
Improvements. Physical enhancements made to property by or
on behalf of the property’s lessee.
Lessee. One who rents
property from another.
In the case of real property, a lessee is also known as a tenant.
Lessor. A person or commercial entity that conveys
property by lease. In the case of real
property, a lessor is also known as a landlord.
Loaned Property. Personal property
furnished to others on a temporary basis.
Heritage assets whose predominate use is general government operations.
Non-Accountable. Property having an acquisition cost that is below the
threshold requirement for recording in the agency property management
records. Personal property having an acquisition cost of less
than $5,000, and deemed not sensitive by the APMO is Non-Accountable. Real Property having an acquisition cost of less than $25,000 is
Non-Capitalized. Assets purchased not meeting the department’s
Operating Lease. An agreement
conveying the right to use property for a limited time in exchange for periodic
rental payments. The Federal agency does
not assume the risks of ownership of the asset.
Personal Property. All property other
than real property, whether tangible or intangible. Examples of tangible personal property
include: equipment, furniture and fixtures, motor vehicles, aircraft, and other
hardware. Examples of intangible
personal property include: copyrights, licenses, and patents.
Present Value. The present worth of future sums of money.
Real Property. Any interest of the
United States in land and interest in land, buildings, and other structures,
additions to buildings, nonstructural improvements, and fixed equipment whether
an addition or replacement located thereon.
The removal from service of long-lived assets, on other than a temporary
basis, by sale, abandonment, recycling, or other disposal method. Retirement can occur before or at the end of
the asset’s useful life.
Salvage Value. The expected
remaining value after an asset has been fully depreciated.
Stewardship. The Federal
Government’s responsibility for the general welfare of the nation in
characterized as having physical substance.
The OCFO is
responsible for USDA’s accounting guidelines.
This regulation prescribes policy and thresholds for capitalization and
depreciation of personal and real property.
The Office of
Procurement and Property Management (OPPM) is responsible for Property
Management. The AGPMR prescribes the
authorities, policies, and related Departmental requirements governing property