Depreciation and Use Allowances. Depreciation and use allowances are unallowable.
Depreciation and Use Allowances. The Computation of use allowances or depreciation shall be based on the acquisition costs of the assets involved. Where actual cost records have not been maintained, a reasonable estimate of the original acquisition costs may be used in the computation.
Depreciation and Use Allowances a . Hos- pi t a l s m a y be co m pe n s a t ed fo r t h e u se of b u ildi n gs, c a pi t a l i m p r ove m e n t s a n d u s a ble eq u ip m e n t o n h a n d t xx x x x x dep r eci a t io n o r u se a llow a n ces. Dep r eci a t io n i s a c h a r ge t o c urr e n t ope r a t io n s w h ic h dis t r ib u t es t h e cos t of a t a n gible c a pi t a l a sse t , less es t i m a t ed r e- s id u a l v a l u e, ove r t h e es t i m a t ed u sefu l life of t h e a sse t i n a s y s t e m a t ic a n d logic x x x x n- n e r . I t does n o t i n volve a p r ocess of v a l u- a t io n . Usefu l life h a s r efe r e n ce t o t h e p r o- spec t ive pe r iod of eco n o m ic u sefu l n ess i n t h e p a r t ic u l a r h ospi t a l’s ope r a t io n s a s dis t i n- g u i s h ed f r o m p hy sic a l life. Use a llow a n ces a r e t h e m e a n s of a llowi n g co m pe n s a t io n w h e n dep r eci a t io n o r o t h e r eq u iv a le n t cos t s a r e n o t co n s ide r ed.
Depreciation and Use Allowances a. Compensation for the use of buildings, other capital improvements, and equipment on hand may be made through use allowance or depreciation. However, except as provided in Attachment B, paragraph f, a combination of the two methods may not be used in connection with a single class of fixed assets (e.g., buildings, office equipment, computer equipment, etc.).
b. The computation of use allowances or depreciation shall be based on the acquisition cost of the assets involved. The acquisition cost of an asset donated to the non-profit organization by a third party shall be its fair market value at the time of the donation.
c. The computation of use allowances or depreciation will exclude:
(1) The cost of land;
(2) Any portion of the cost of buildings and equipment borne by or donated by the Federal Government irrespective of where title was originally vested or where it presently resides; and
(3) Any portion of the cost of buildings and equipment contributed by or for the non-profit organization in satisfaction of a statutory matching requirement.
d. Where depreciation method is followed, the period of useful service (useful life) established in each case for usable capital assets must take into consideration such factors as type of construction, nature of the equipment used, technological developments in the particular program area, and the renewal and replacement policies followed for the individual items or classes of assets involved. The method of depreciation used to assign the cost of an asset (or group of assets) to accounting periods shall reflect the pattern of consumption of the asset during its useful life. In the absence of clear evidence indicating that the expected consumption of the asset will be significantly greater or lesser in the early portions of its useful life than in the later portions, the straight-line method shall be presumed to be the appropriate method. Depreciation methods once used shall not be changed unless approved in advance by the cognizant Federal agency. When the depreciation method is introduced for application to assets previously subject to a use allowance, the combination of use allowances and depreciation applicable to such assets must not exceed the total acquisition cost of the assets.
e. When the depreciation method is used for buildings, a building's shell may be segregated from each building component (e.g., plumbing system, heating, and air conditioning system, etc.) and each item depreciated over its estimated...
