CLASSIFYING PROPERTY - BUILDINGS AND BUILDING IMPROVEMENTS - 8610.2

(Renumbered: 10/2020)

(Revised 10/2020 and renumbered from 8612)

Buildings

Buildings are structures that provide workspace, storage space, or are used in some other capacity for state activities. Buildings are recorded as a separate capital asset, even if it is closely associated with another capital asset. For example, the land under a building must be classified as land rather than included as part of the cost of the building. The appropriate cost must be assigned to each capital asset (i.e., land and building). Buildings are capitalized if costs meet the capitalization threshold in SAM section 8602.

The amount capitalized as building costs includes the purchase price or construction cost plus all other related costs incurred to place the building in its intended location and condition for its intended use. Examples of related costs are listed below:

• Legal and title fees
• Professional fees of engineers
• Attorney fees
• Appraisers fees
• Financial advisors
• Closing costs
• Appraisal and negotiation fees
• Damage payments
• Cost of fixtures permanently attached to a building or structure

Buildings do not include furniture, fixtures, or equipment which are not integral parts of the building.

Building Improvements

Building improvements include additions, improvements, or betterments. Additions are extensions of existing structures (i.e., increase to useful space). Improvements and betterments ordinarily do not increase the physical size of the asset. Instead, they make the existing asset better than its previous condition. For example, remodeling, adding loading docks, and replacing HVAC.

Additions, improvements and betterments provide additional value and should be capitalized if the capitalization threshold in SAM section 8602 is met and if at least one condition in SAM section 8618.1 is met. In contrast, repairs and maintenance retain value rather than provide additional value. See SAM section 8618.2.

See SAM section 8610.7 for more detail on constructing assets.

Record Building and Building Improvements in Account 1601000 (Legacy Account 2321).