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Accounting for Land

Establishes when costs for real estate, also known as land, must be capitalized at the university.

Land is characterized as having an unlimited life. Land is the surface or crust of the earth, which can be used to support structures, and may be used to grow crops, grass, shrubs and trees, together with applicable acquisition costs. 

Procedures

1. Purchases

Real estate should be recorded separately from Buildings and Structures (visit separate page). When the costs of the land and the major structures are not separately listed in the purchase price, estimated amounts should be calculated and recorded in the appropriate asset accounts.

However, if land and an existing building are purchased for the purpose of erecting a new building, the cost of the purchased building, as well as the cost of razing it, are to be included as part of the cost of the land.

All costs incurred in the acquisition of property should be capitalized. These include, but are not limited to:

  • Price of land and appraisal
  • Demolition of existing buildings and improvements

     
  • Accrued and unpaid taxes at date of acquisition
  • Removal, relocation, or reconstruction of property of others
  • Title insurance and legal
  • Land excavation, fill, grading, drainage, and clearing

Land acquisition costs that are not capitalized include interest expense and loan fees for purchases financed by borrowed monies.

2. Ground Leases

Public-Private Partnerships or public-public partnerships (P3) are arrangements between a transferor (a government) and an operator (governmental or nongovernmental) in which all four criteria are met, as follow:

  • Transferor conveys to an operator the right and related obligation to provide public service through the operation of a capital asset in exchange for significant consideration.
  • Operator collects and is compensated by fees from third parties.
  • The transferor determines or has the ability to modify or approve services, customers, and prices or rates.
  • Transferor is entitled to significant interest in the service utility of the facility at the end of the arrangement.

Agreements between private entities and UC Davis that enable both the development and ongoing operation of privately owned assets such as student housing and hotels on campus property through a ground lease.

Real Estate Services (RES) is responsible for coordinating with our private developer partners on the development of all new P3 projects. Once projects are completed, ongoing P3 relationships are managed by either RES or the campus’ Student Housing & Dining Services (SHDS).

An evaluation of P3 effective on or after July 1, 1993 should be conducted for GASB 14 by completing the questionnaire shown on related forms below and returned to Capital Asset Accounting at caa@ucdavis.edu.

A type of public-private partnership agreement is Service Concession Arrangements (SCA). According to Governmental Accounting Standards Board (GASB) 60, a Service Concession Arrangement (SCA) is an arrangement in which UC Davis (the transferor) conveys to an operator (governmental or nongovernmental entity) the right and obligation to provide services through the use of infrastructure or another capital asset in exchange for significant consideration and the operator collects and is compensated by fees from third parties. For further information about the P3 project development process refer to RES homepage at Real Estate Services.

All ground leases effective on or after July 1, 2012 should be evaluated for GASB 60 by completing the questionnaire shown on related forms below and returned to Capital Asset Accounting at caa@ucdavis.edu.

3. Donated

Assets acquired by gift are recorded at the appraised value (fair market value) at the date of the gift. Refer to gifts and endowment page for more details.

4. Retirement

An asset retirement obligation is a legally enforceable liability associated with the retirement of a capital asset. The university has an asset retirement obligation when it is compelled to permanently retire a tangible capital asset or dispose a replaced part that is a component of a tangible capital asset due to legally enforceable asset retirement liability. All decisions to permanently retire a tangible capital asset effective on or after July 1, 2018 should be evaluated for GASB 83 by completing the questionnaire shown on related forms below and returned to Capital Asset Accounting at caa@ucdavis.edu.

5. Reporting

CAA will collaborate with RES to identify any purchases/sale of faculty or staff housing in the current fiscal year or June 30 to properly record the transaction. UCOP will distribute Real Estate Transaction Listings to CAA for recording of any activity. Real estate will be capitalized, but not depreciated.