Learn About the Capitalization of Building Projects and Renovations

Learn about the capitalization of building projects and renovations, as well as capital leases, at Columbia University.


What is Capitalizing Building Projects and Renovations?

An item is capitalized when it is recorded as an asset, rather than an expense, on a balance sheet. In order to acquire, build, renovate and maintain most University-owned buildings, the capitalization and depreciation of costs are necessary. 

Additionally, the process of componentizing capital expenses related to research buildings—which are included in Columbia’s indirect cost proposal—may be required. Componentization of expenses allows the University to more accurately match the annual depreciation of building additions, thereby accelerating recovery of building depreciation costs through the Facilities and Administration (F&A) rate. 

What are Capital Leases?

A capital lease is a lease that meets one or more of the following criteria:

  • The lease contains an option to purchase the property.
  • Ownership is transferred to the lessee at the end of the lease term.
  • The lease term exceeds 75% of the asset’s estimated economic life.
  • The present value of the lease payments exceeds 90% of the fair market value of the asset.
Who is Responsible for Capitalizing Building Projects and Renovations?

The Office of the Controller is responsible for:

  • Providing guidance to Facilities on the building costs capitalization process
  • Providing guidance to Facilities on costs that should be classified as repairs and maintenance
  • Providing Facilities with a list of Accounting and Reporting at Columbia (ARC) accounts that require annual componentization
  • Providing guidance to Facilities on the componentization processes
  • Performing the annual calculation of componentized depreciation for indirect cost recovery (ICR) buildings
  • Performing the annual calculation of depreciation for non-ICR buildings

The Facilities Management Offices (CUIMC, Morningside, and Lamont) are responsible for:

  • Ensuring that all costs related to FIN 47 environmental liabilities are segregated to the appropriate account to ensure they are not considered in the capitalization of building additions
  • Ensuring that all operational expenses are related to a renovation or betterment project (i.e. cost of shuttle buses to transport students to a temporary location while construction is in progress or temporary walkways while construction ongoing)
  • Ensuring that componentization is applied consistently from building to building and year to year
  • Discussing new/unforeseen issues with the Office of the Controller in a timely manner

Please note: The following guidance relates to all University buildings. 

Costs associated with building acquisitions and new constructions

The associated costs of building acquisition to be capitalized that should be included in the original cost of land include, but are not limited to:

  • Original contract or purchase price
  • Brokers' commissions
  • Closing fees, such as title search, and legal fees
  • Real estate surveys
  • Grading, filling, draining, clearing
  • Demolition costs (e.g., razing of an old building)
  • Assumption of liens or mortgage 

The associated costs of building acquisition or constructions that are included in the original capital cost of the building include, but are not limited to:

  • The original contract price of construction
  • Expenses incurred in remodeling, reconditioning, or altering a purchased building to make it available for its intended purpose
  • Relocation of non-University facilities
  • Excavation, grading, or filling land
  • Design and supervision costs
  • Building permits
  • Legal and architectural fees
  • Insurance costs during construction phase
  • Interest costs during construction of proprietary fund buildings
Cost types not to be capitalized

The following are types of expenses that should not be capitalized during the acquisition of a building:

  • Cost relating to the removal or demolition of buildings, structures, equipment or other facilities. Three exceptions are as follows:
    • Cost to remove or demolish a building or other structure existing at the time of acquisition of land with the intention of removal or demolition to accommodate its intended use (such cost is considered part of the land)
    • Cost to remove or demolish a building or other structure with the intention of replacing the old asset (such costs are considered a part of the cost of the new asset)
    • Costs to demolish an existing building will be capitalized if demolition occurs 12 months or more after acquisition
  • Cost incurred on assets that are not purchased (e.g., surveying, title searches, legal fees, and other expert services on land not purchased)
  • Extraordinary costs incidental to the construction of capital assets such as those due to strike, flood, fire or other casualties
  • Cost of abandoned construction
  • Costs subsequent to asset acquisitions (improvements or betterments)
    • In order for a particular renovation or betterment project to be capitalized it must satisfy three criteria:
      • The project must exceed $50,000, and
      • It must add value to the component, and
      • It must extend the useful life of the component.

If a project does not satisfy the criteria in Capitalization of Costs above, it is not eligible for capitalization and should not have a CAPTL PC Business Unit. Some examples of projects that would not be eligible for componentization include:

  • Parts, labor, and other costs related to repair—in order to maintain a normal operating condition—that realize their originally anticipated useful life
  • Preventative maintenance, maintenance contracts, janitorial services, window washing, and extermination services
  • Adding, removing, and/or moving of walls relating to renovation projects that are not considered major rehabilitation projects and do not increase the value of the building
  • Improvement projects of minimal or no added life expectancy and/or value to the building
  • Plumbing or electrical repairs
  • Cleaning, pest extermination, or other periodic maintenance
  • Interior decoration, such as draperies, blinds, curtain rods, and wallpaper
  • Exterior decoration, such as detachable awnings, uncovered porches, decorative fences, etc.
  • Maintenance-type interior renovation, such as repainting, touch-up plastering, replacement of carpet, tile, or panel sections, sink and fixture refinishing, etc.
  • Maintenance-type exterior renovation such as repainting, replacement of deteriorated siding, roof, or masonry sections
  • Any other maintenance-related expenditures which do not increase the value of a building or increase the useful life of the building

According to generally accepted accounting principles (GAAP), the "hard cost" components of a building (i.e., its shell, roof, heating, ventilation, and air conditioning (HVAC), and other systems) may be depreciated separately over each component’s estimated useful lives. This accounting treatment allows the University to more accurately match the annual depreciation of building additions and accelerate recovery of building depreciation costs through the F&A rate.

In September of each year, the Office of the Controller will provide Facilities with a link to an access database form used to collect componentization of the prior fiscal year’s construction activity.

"Soft costs" consist of those costs that are directly related to the completion of the construction/renovation project, but do not correlate directly to the stated list of components. Examples of Soft Costs include project management fees and guard service. Soft Costs should be allocated proportionally to the components based on the assignment of the hard costs.

The following table contains information about the assignment of hard cost components:

The following expenses related to building improvement and betterment projects are not eligible for capitalization as part of the building and therefore must be segregated to the appropriate account ranges:

Capital Equipment – All movable equipment with a unit cost of $5000 or more and a useful life of 2 or more years should be charged to an account in the 680XX series.  These items will be capitalized and tracked as movable equipment, not as a component of the building.

FIN 47 Expenses - all costs related to FIN 47 environmental liabilities must be segregated to the appropriate account listed below to ensure they are not considered in the capitalization of building additions.

Perez Cantrell is responsible for the annual componentization process. Any questions directly related to annual componentization can go directly via phone (212) 851-4092 or via e-mail at [email protected].

David Denman (Manager, Capital Asset Accounting) is responsible for coordinating the annual componentization process with building depreciation for the ICR buildings as well as Non-ICR building depreciation. Any questions regarding depreciation issues for both ICR and Non-ICR buildings can be directed via phone (212) 851-7329 or via e-mail at [email protected].

Property and Equipment Manual

For all Columbia University property and equipment policies and information, use the Property and Equipment Manual.


There are a variety of forms that you can use for managing capital assets, including:


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