Purpose:
University owned capital equipment may be offered for trade-in by your campus Purchasing Organization for similar capital equipment. The purchase requisition and purchase order needs to include information about the assets involved in a trade-in. The asset number, equipment description, I.U. tag number and the dollar amount received (or trade-in allowance) for the assets being trade-in must be provided on the purchase requisition and purchase order.

Scope:
Indiana University Organizations.

Definitions:
Capital Assets require an acquisition value of $5,000.00 and a life expectancy of one year.

Trade-in of Similar Capital Equipment GAAP defines similar as those assets that are used for the same general purpose, are the same general type, and are employed in the same line of business. Similar assets apply to those assets which are exchanged as a result of technological advancements as well as to those which are exchanged as a result of wearing out.

How the Process Works:
A capital expense object code should be used to identify the trade-in allowance. When a capital expense object code is used the cost of the asset will be reduced by the trade-in allowance.

Example: Purchase Order

Item No	Quantity	Description	Unit Cost	Extended Cost
L001	5	Printing Press Object Code 7000	150,000	750,000
L002		Trade-in Allowance Object Code 7000	-130,000	-130,000
		Asset number of trade in: 123356 Desc: Printing Press IU Tag Number: IU00045
			Total Order 620,000

Cost of the five assets created for the printing press purchase will be $124,000.00 each.

Procedure:

1. Once the department and purchasing have determined that existing assets will be traded in on a purchase order and the purchase order has been issued as outlined above, the department will need to issue an asset retirement document for those assets being traded in. For information on how to retire an asset please refer to the asset retirement training document at: FIS Printable Documents.
   
   1. The retirement reason code 2 - Trade-in should be use on the asset retirement document.
   2. A note needs to be included that will inform the capital asset department of the purchase order from which the new assets are being purchased.
2. Upon approval of the asset retirement document from Capital Asset Management the net book value will be determined from the assets that were retired as a result of the trade-in. This will be handled within the capital asset department.
   1. Net Book Value = Loss. The net book value will be used with a JV document to increase the cost of the new assets created from the trade in and remove the net book value, if any, from the retirement of the assets traded in. This transaction will only take place if the net book value will increase each asset created from the new purchase by $1,000 or more. If less than $1,000 per asset the net book value or loss will not be removed and the value of the new assets created from the new purchase order will not be increased.
   2. Example of when the value or new assets will be increased. Since the NBV of $100,000 distributed by a percentage of cost is $20,000 per asset then the new asset cost will be increased. If the NBV would have resulted in a distribution by percentage of cost of less than $1,000 per asset then the value of the new assets would remain the same and would not be increased.

Example for asset number 123356

Retired asset number 123356 book value.			NBV 100,000
Assets created from trade in	Total Asset Cost	Percentage Of Cost	Addition to Asset Cost	Adjusted Asset Cost
123456	124,000.00	20%	20,000.00	144,000.00
123457	124,000.00	20%	20,000.00	144,000.00
123458	124,000.00	20%	20,000.00	144,000.00
123459	124,000.00	20%	20,000.00	144,000.00
123460	124,000.00	20%	20,000.00	144,000.00
Total Asset Cost	620,000.00	100%	100,000.00	720,000.00

Trade-in Moveable Capital Equipment Object Code Table

Cost	Object Code	Description
Greater than or equal to $5,000	7000	Capital Equipment
Greater than or equal to $5,000	7015	Computer Equipment
Greater than or equal to $5,000	7016	Computer Software
Greater than or equal to $5,000	7030	Capital Equipment Federally Funded
Greater than or equal to $5,000	7035	Computer Equipment Federally Funded
Greater than or equal to $5,000	7045	Computer Software Federally Funded
Greater than or equal to $5,000	7031	Capital Equipment Federally Owned
Greater than or equal to $5,000	7032	Capital Equipment Other Owned
Greater than or equal to $5,000	7036	Computer Equipment Federally Owned
Greater than or equal to $5,000	7046	Computer Software Federally Owned