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Notes Regarding Equipment Fabrication


  • EQUIPMENT means property with an expected service life of one year or more, and a unit acquisition cost of $5,000 or more.
  • Only expenditures for those items which will be used to form an integral part of a clearly defined, stand-alone piece of fabricated equipment should be processed as fabrication expenditures.
  • Components and labor (e.g., shop time) costs associated with the fabrication of a piece of equipment are to be classified as fabrication expenditures.
  • Items associated with, but not an integral part of, a fabrication must be considered separately and not included as a cost.
  • Tools required for the fabrication process must also be considered as separate items.

The normal procedure when fabricating a piece of equipment is to keep records as you go and file for the return of the overhead that was taken out during construction. Problems with this procedure occur when the construction phase exceeds ninety days as that is the time allowed to correct financial transaction “errors”. Restoring the overhead to the account from which it was taken is just such an error correction. To avoid this problem and to reduce paperwork, Property Accounting worked out a procedure with the Physics department whereby we would declare that we were fabricating a piece of equipment. An asset number (“PY” number) is assigned for tracking purposes and all APPROPRIATE fabrication charges are free of overhead up front.