602.0 Fixed Asset - Building Component Depreciation

The following policy provides information for the consistent application of building component depreciation and serves as a reference for answering questions relating to building component depreciation.

OBJECTIVES OF BUILDING COMPONENT DEPRECIATION: The purpose of building component depreciation is to more accurately measure the annual depreciation of multi-functional academic buildings with significant investments in fixed equipment and infrastructure. Buildings are made up of components with each component having its own useful life. Depreciation is more accurately measured when based on the useful life of each component.

POLICY PROVISIONS: Where significant organized research programs exists, PSU may componentize some or all academic buildings on their campus to more accurately measure the annual depreciation. Componentized depreciation is based on the useful life of each component.

Building component depreciation may only be applied prospectively based on componentizing new buildings and/or applying componentization on the undepreciated portion of existing buildings.

Building component depreciation is limited to buildings. Building component depreciation does not apply to non-building real property such as improvements other than buildings, infrastructure, land, and land improvements, or to personal property.

• When a building is componentized, all previous and subsequent capitalizations will be componentized.
• Additions to a componentized building will also be componentized.
• Capitalized improvements or remodels to a componentized building will also be componentized.

Maintenance, repair and upkeep of each component that neither adds to the permanent value nor appreciably prolongs its intended life will be expensed and not capitalized (OMB Circular A-21 J.26)