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Acquisition of Equipment – Capital and Operating Leases

Included on this page:

• Definition
• Procedure
• Forms Required
• Frequently Asked Questions
• Regulations
• Contacts

Definition

Capital Lease  –  A lease with a net present value of future minimum lease payments or fair value (whichever is less) greater than $10,000 that meets one or more of the following criteria:

• Lease term is greater than 75% of the equipment's estimated economic life.
• Lease contains an option to purchase the equipment for less than fair market value.
• Ownership of the equipment is transferred to the University at the end of the lease term.
• Present value of the lease payments exceeds 90% of the fair market value of the equipment.

A capital lease of equipment transfers all benefits and risks inherent in ownership to the University.  

Operating Lease  –  A lease that does not meet one or more of the criteria included in the Capital Lease definition.  In addition, at the University of Washington, any lease with a net present value of future minimum lease payments or fair value (whichever is less) less than $10,000 is automatically accounted for as an operating lease, even if it otherwise meets the capital lease criteria.  Operating leases should be coded 03-XX with the sub object code range of 80-89.

Procedure

• Department chooses to enter into an equipment lease.

• Department works with Financial Accounting (Dave Beaulieu at 543-8811 or db32@u.washington.edu) to determine if the lease should be classified as capital or operating.

• If determined to be capital:

• Financial Accounting prepares journal vouchers throughout the life of the lease using the appropriate 09-XX object codes to record principal and interest payments.

• Within 24 hours of receipt, department tags each asset over $2,000 and enters it into OASIS as a "T" status asset.  Information to be entered should include:

• UW Tag Number (contact your departmental inventory person)
• Description
• Manufacturer
• Model
• Serial Number
• Custodian/User
• Building
• Wing
• Room Number
• Status (enter - T)
• Requisition Number (enter - 000000)
• Accountable Budget
• Total Cost
• Class Code
• Date Received
• Acquisition Method (enter - LP for Lease Purchase)

• Equipment Inventory reviews the OASIS entry for complete information and approves the asset.

• If determined to be operating:

• Department codes the lease with the appropriate 03-XX object code and 80-89 range sub object code.

• If planning to have leased equipment for more than 6 months, within 24 hours of receipt, department tags each asset over $2,000 and enters it into OASIS as an "N" status asset.

                    Note:  Operating Leases are only in OASIS for tracking purposes.  They should never be in Temporary                         (T) or Approved (A) status.  

                    Information to be entered should include:

• (Non-Inventorial PURPLE) UW Tag Number (contact your departmental inventory person)
• Description
• Manufacturer
• Model
• Serial Number
• Custodian/User
• Building
• Wing
• Room Number
• Status (enter - N)  
• Requisition Number (enter - 000000)
• Accountable Budget
• Total Cost
• Class Code
• Date Received
• Acquisition Method (enter - LP for Lease Purchase)

• Equipment Inventory reviews the OASIS entry.

Forms Required

• Optional - UW Equipment Information (Orange) Card

Frequently Asked Questions

For frequently asked questions related to this topic, please visit our FAQ page.

Regulations

State Administrative and Accounting Manual (SAAM), Chapter 30: Capital Assets

University of Washington Administrative Policy Statements:

• Section 50 – Services 
• Section 60 – Equipment Inventory 

Federal Regulations:

• OMB Circular A-110
• OMB Circular A-21
• Federal Acquisitions Register 

Contacts

State/University Titled Equipment:    206-543-4663 or eio@u.washington.edu
Federally Titled Equipment:              206-543-4640 or 206-616-4047