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Livestock on hand for the purposes of conducting research, testing, or educational activities and which will be sold upon completion of the project should be classified as salable inventory of the Current Funds Balance Sheet.  For balance sheet valuation purposes, livestock in this classification will be valued at net realizable value at June 30 (market value less cost of disposal).

I.Leases

Under normal circumstances lease or rental payments for the temporary use of equipment and facilities is considered a normal operating expenditure.  On occasion, the University may negotiate a contract under which the lease contains:

A bargain purchase option;

Covers 75 percent (75%) or more of the estimated economic life of the property;

Lease transfers ownership to the University at the end of the contract; or

The present value of the payments exceeds 90 percent (90%) of the fair value of the property at the inception of the contract.

If one of these criterion are met, the item is a capital lease.

Under these circumstances, the full value of the contract, including the ultimate purchase, should be capitalized in an appropriate fixed asset account according to estimated useful life at the time the contract is made.  At the same time, the total lease contract liability should be established.  All subsequent payments under the contract should be recorded in the appropriate operating expense account and later transferred by accounting as a reduction of the Lease Payable account.

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