(3) Once a hospital has applied one of the methods, that method must be used consistently thereafter.
(ii) All purchases of minor equipment may be capitalized and depreciated over their estimated useful lives. The amount of the base stock would be adjusted only if there were a significant change in the size of the base stock. Any replacements to this base stock would be reported as operating expenses. (i) The original cost of this equipment may be capitalized and not depreciated. (2) There are two ways in which the cost of minor equipment may be reported: (v) generally, a useful life of less than three years. (ii) comparatively small in size and unit cost (i) in general, no fixed location, and subject to use by various cost centers within a hospital The general characteristics of this equipment are: (1385) (1) Minor equipment includes such items as wastebaskets, bedpans, silverware, mops, buckets, etc. All other principles cited above will continue in force. The new $500 limit will also apply to alterations and improvements. (3) For cost reporting periods beginning Januand thereafter, the historical cost limits will be adjusted to "an historical cost of at least $500 or, if it is acquired in quantity, the cost of the quantity is at least $1,000". Normal repair and maintenance costs are to be reported as expense in the current accounting period. Alterations and improvements in excess of $300 which extend the life a minimum of three years or increase the productivity or efficiency of an asset, as opposed to repairs and maintenance which either restore the asset to or maintain it at its normal or expected service life, must be capitalized and depreciated over their expected useful lives, not to exceed the lives of the asset to which they are fixed. The hospital may, if it desires, establish a capitalization policy with lower minimum criteria but under no circumstances may the above criteria be exceeded. (2) If a depreciable asset has an historical cost of less than $300, or if the asset has a useful life of less than three years, its costs are recorded in the year it is acquired, subject to the provisions of writing off the cost of minor movable equipment. (1384) (1) If a depreciable asset has at the time of its acquisition an estimated useful life of three or more years and an historical cost of at least $300, its cost must be capitalized, and written off ratably over the estimated useful life of the asset. (2) All equipment purchased on or after the first day of a hospital's first accounting period beginning after the effective date of this manual, and all equipment purchased prior to such date where the necessary records have been maintained, must be segregated in the plant ledger record by cost center so that the cost of equipment and the related depreciation for each cost center is available. Other items of equipment, if they are similar and are used in a single cost center, may be grouped together and treated as a single unit within the ledger. Some items of equipment should be treated as individual units within the plant ledger when their individuality and unit cost justify such treatment.
(1383) (1) To maintain accounting control over capital assets of the hospital, a plant asset ledger should be maintained as part of the general accounting records. Cost is defined as historical cost or fair market value of donated property on the date of acquisition. The historical cost shall not exceed the lower of current reproduction cost adjusted for straight-line depreciation or fair market value at the time of purchase. (2) Property, Plant and Equipment must be reported on the basis of the historical cost incurred by the present owner in acquiring the asset under a bona fide sale. Cost shall be defined as historical cost or fair market value at the date of gift of donated property. (1382) (1) Property, Plant and Equipment must be reported on the basis of cost. Cost of construction in progress and related liabilities must be recorded in the Unrestricted Fund as incurred except for assets and liabilities related to certain debt agreements. (1381) Property, Plant and Equipment and related liabilities must be recorded in the Unrestricted Fund, since segregation in a separate fund would imply the existence of restrictions on the use of the asset. (a) Classification of fixed asset expenditures. 442.18 Accounting for property, plant and equipment.
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