Académique Documents
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03-29-12 Final
Table of Contents
I.
INTRODUCTION ........................................................................................................................... 3
II.
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
III.
B.
C.
D.
Leases ........................................................................................................................................18
1.Authorization and Accounting .................................................................................................18
2.Capitalization ..........................................................................................................................18
3.Valuation .................................................................................................................................18
INTRODUCTION
The purpose of the Capital Authorization Request Policy (CAR Policy) is to address the procedures
for dealing with capital expenditures. The policies and procedures governing the capital expenditure
authorization process work in conjunction with the companys Investment and Commitment
Authorization Policy, Contract Review, Execution and Administration Policy, purchase authorization
process and other control processes that address the companys expenditures, financial
commitments and obligations.
The Corporate Finance Department is authorized to administer the CAR Policy. This manual
provides guidelines for the administration of the Companys capital investments, however, it is
recognized that these policies and procedures may not address every circumstance. In such cases,
the Corporate Finance Department will exercise its judgment whether additional or different analysis
or exceptions are required. Modifications to this policy may be made from time to time to streamline
procedures and to clarify issues as they arise.
Divisional CARs. The CAR must be approved by the originator, the business unit
manager, the regional manager (if one exists), the product line manager (if one exists),
the division controller and the division head.
(b)
IT and Vehicle CARs. In addition to the divisional approvals discussed in (a), the Vice
President of IT must approve IT and communications related expenditures (including
desktop and laptop PCs), and the Director of Global Supply Chain and Procurement
must approve all vehicle, forklift and office equipment expenditures.
(c)
Corporate CARs. All corporate CARs must be approved by the CFO except that PC
and vehicle purchases under $50,000 require only the approval of the VP of Finance
and the VP of IT in the case of PCs and the Director of Global Supply Chain and
Procurement in the case of vehicles.
(d)
(b)
All major investments must originate through the electronic CAR system. A
separate routing path will be used to stop the routing at the division head. The
Capital Coordinator will notify the EC of the major investment CAR to add to
Tanks
Pumps and engines
Filtration units
Mix pits
Other property & equipment
Self constructed assets
Office furniture
Office equipment
Computers
Communications equipment
Rigs, barges and boats (crew & tugs)
Oilfield equipment
1120
1130
1140
1150
1160
1180
1185
1190
1195
1200
1205
1210
1310
1320
1330
1340
1350
1390
5
5
3
5
10
5
1300
Autos
Light trucks
Heavy trucks
Trailers
Other vehicles
a) Land
b) Buildings
c) Leasehold improvements
10
5
10
10
5
1391
1392
1393
4.2
4.2
5
5
5
N/A
25
5
1450
1451
1455
1460
1465
As appropriate
Est. reserves & UOP
Est. reserves & UOP
Est. reserves & UOP
1470
As appropriate
6. Chemical Plants
1400
Civil/Mechanical/Electrical
Instrumentation
Architectural/Buildings/Warehouse
Other
20
10
30
20
15
5
20
15
20
10
5
20
10
5
20
20
10
20
20
10
20
20
5
5
5
10
7
5
5
5
5
10
10
5
15
10
5
15
15
5
5
5
c) Freight
20
10
20
10
b) Equipment
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
20
10
f) Engineering
g) Field service and startup
h) Travel and living
20
20
20
10
10
10
B. Costs to be Capitalized
The following costs are incurred at the time of the asset purchase and should be
capitalized:
1. Assets Acquired by Purchase
a) Machinery and Equipment
(1) Contract or invoice cost
(2) Freight, import duties, handling and storage costs
(3) Specific in-transit insurance charges
(4) Federal excise taxes
(5) Costs of foundations
(6) Costs of erection and/or installation
(7) Costs of reconditioning used equipment when purchased to make it available for
the purpose for which it was acquired
(8) Initial complement of spare parts specifically related to a machine; these parts are
unique to a particular piece or category of machinery
(9) Architectural, engineering, and consulting fees for design and supervision
(10) Charges of testing and preparation for use
(11) Sales, use and other taxes imposed on the purchase
b) Furniture and Fixtures
(1) Furniture and fixtures are generally the same as machinery and equipment; the
cost of an entire purchase or remodeling project, as opposed to individual invoice
components, should be measured against the $3,000 threshold.
(2) Leasehold improvements at the inception of the lease period. Subsequent
expenditures should be considered remodeling projects and expensed
Costs to correct mechanical, design or constructor deficiencies, which prevent the facility
from meeting operating criteria, should be capitalized if identified during the preoperating phase and corrected at the earliest opportunity, even if several months later
(during a scheduled shutdown).
b) Demolition, removal and moving costs
Demolition charges should be capitalized to land where the land is purchased with the
intent to demolish and the existing structure is of no value to the Company.
THE COSTS OF RELOCATING EXISTING INSTALLED MACHINERY FROM ONE
CITY TO ANOTHER, FROM ONE PLANT TO ANOTHER, OR FROM ONE PART OF A
PLANT TO ANOTHER IS TO BE EXPENSED.
c) Site preparation costs
Site preparation costs for the grading, clearing and surveying of the land are to be
capitalized. Relocation of any existing structures or storage facilities should be expensed
if no value is added by their relocation; i. e., no increased capacity or life.
d) Pollution control equipment
Pollution control equipment is deemed to be a cost of preparing an asset for use and
should be capitalized if the control equipment meets the asset unit criterion
4. Assets Acquired by Transfer from Other Divisions or Subsidiaries
These assets are recorded at their original cost and related accumulated depreciation,
unless transferred at a gain. When assets are transferred at a price greater than their book
value, the resulting gain on the sellers books must be eliminated. The resulting increase in
depreciation expense on the buyers books (i. e. the intercompany gain built into the asset
cost) must also be eliminated over the life of the asset. These eliminations must occur within
the appropriate Divisions operating units financial statements.