Expense - Depreciation

Depreciation expense should be calculated in accordance with the institution's capitalization and depreciation policies. See ¶ 308 on capital assets for additional information. Depreciation expense is considered both a functional and natural expense classification under GASS Statements 34 -and 35. In addition, when functional expenses are reported in the Statement of Revenues, Expenses and Changes in Net Assets, depreciation expense can be allocated to other functions such as instruction, research and student services, or allocated only to plant operation and maintenance expenses, or reported separately. When depreciation expense is reported as a functional expense, depreciation for all activities (educational and general, auxiliary enterprises and hospitals) may be combined and. reported as one amount in the Statement of Revenues, Expenses and Changes in Net Assets, or it may be segregated between these activities if the Statement shows separate columns or other means to delineate expenses between these activities.

The allocation methodology may be either a simple or complex one such as a multiple allocation approach. Generally, depreciation expense for buildings may be allocated based on the usage of the buildings. This is accomplished by a periodic inventory of the usage of the space in each building. Depreciation expense on equipment may be allocated to other functions based upon the location of the equipment and the use of that space. This is also accomplished through a periodic inventory of the equipment.