Title: Business Procedures Manual | 7.4 Buildings and Building Improvements | University System of Georgia
Headings: 7.4 Buildings and Building Improvements
Business Procedures Manual
Essential business procedural components for University System of Georgia institutions.
7.4 Buildings and Building Improvements
7.4.1 Building Definition
7.4.2 Building Improvement Definition
7.4.3 Depreciation Methodology
7.4.4 Capitalization Threshold
Purchased Buildings
Constructed Buildings
Building Improvements/Replacements
7.4.5 Building Maintenance Expense

Content: The useful life of the improvement (the “child”) should generally not exceed that of the original asset (the “parent”). However, if the improvement is not an integral part of the original asset, it may possess a different useful life than the parent asset. For example, the useful life of a floor renovation project should not exceed the useful life of the building asset to which it relates because it is an integral part of the building that cannot exist on its own. Alternately, a wing addition to a building could have a useful life that exceeds the life of the building to which it is attached because it did not exist as part of the original asset. Building improvements increasing the building’s useful life by at least 25 percent of the original life period should be capitalized in one of two ways: Capitalize as a betterment and record as an addition of value to the existing building using a parent/child asset management relationship. The parent’s useful life should be modified for the increase in useful life. If fully depreciated, recapitalize the eligible improvements as a new building asset and retire the original building asset. This procedure would be used in cases where major renovations are completed. 7.4.3 Depreciation Methodology
(Last Modified on May 1, 2017)
The straight-line depreciation method (historical cost less residual value, divided by useful life) will be used for buildings, building improvements, and their components.