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Part 1. Organization, Finance, and Management

Chapter 35. Financial Accounting

Section 6. Property and Equipment Accounting

1.35.6 Property and Equipment Accounting

Manual Transmittal

August 20, 2026

Purpose

(1) This transmits revised IRM 1.35.6, Financial Accounting, Property and Equipment Accounting.

Material Changes

(1) IRM 1.35.6.1(5), Program Scope and Objectives, added “IT, FMSS, CI, OCPO” and removed “and the IRS business units”.

(2) IRM 1.35.6.1(6), Program Scope and Objectives, removed “maintain internal controls to”, and added “from purchase to disposal, and accurate depreciation expense recordation”.

(3) IRM 1.35.6.1.1(3), Background, added “and capitalization thresholds”.

(4) IRM 1.35.6.1.3(m), Responsibilities, removed business units for redundancy.

(5) IRM 1.35.6.1.3.4(1), Chief, Facilities Management and Security Services (FMSS), changed “using furniture and equipment” to “managing furniture, equipment and leasehold improvements”.

(6) IRM 1.35.6.1.3.5, Deputy Chief, FMSS, changed “in directing the Division that” to “working with the U.S. General Services Administration, which”.

(7) IRM 1.35.6.1.3.8, Program Manager, Information Technology User and Network Services (UNS), Operations Service Support changed to Program Manager, Information Technology End User Digital Services (EUDS), Operations Service Support.

(8) Prior IRM 1.35.6.1.3.13(1), Business Units, removed.

(9) IRM 1.35.6.1.5(1)(a), Program Controls, changed “Analyzing all property and equipment, and certain expense transaction are classified correctly” to “Ensuring property, equipment, leases and expense transactions greater than IRS thresholds are classified timely and correctly”.

(10) IRM 1.35.6.1.5(1)(b), Program Controls, added “Ensuring disposals are recorded timely and properly”.

(11) IRM 1.35.6.1.5(1)(c), Program Controls, changed “Reconciling property and equipment databases between AAM, KISAM and CIMIS” to “Reconciling property and equipment on AAM to external inventory systems, IRWORKS and CIMIS”.

(12) IRM 1.35.6.1.5(1)(d), Program Controls, changed “Reconciling AAM to the general ledger” to Reconciling the AAM sub-ledger to the General Ledger”.

(13) IRM 1.35.6.1.5(1)(e), Program Controls, added “Ensuring depreciation runs and records correctly to the General Ledger”.

(14) IRM 1.35.6.1.6, Terms and Definitions, made the following revisions:

  • Removed Capital asset
  • Removed Knowledge, Incident/Problem, Service and Asset Management (KISAM)
  • Impairment updated to Impairment, general PP&E other than IUS
  • Added Impairment, IUS
  • Removed Lease
  • Added Lease, Right-to-Use (RTU) Removed Rehabilitation
  • Added Right-to-use Lease, “A lease of equipment or has (embedded) underlying equipment in the service contract”
  • Added “SAP” to Shopping Cart and clarified the definition

 

(15) IRM 1.35.6.1.7, Acronyms, made the following revisions:

  • Removed COTS
  • Added FASAB
  • Removed GAAP
  • Removed KISAM
  • Removed NPV
  • Removed NRV
  • Removed OMB
  • Added “SAP” to PPS to define the tool that it’s embedded in
  • Added AKM
  • Added CIO
  • Added GSA
  • Added IRSAP
  • Added MOU
  • Added PGI
  • UNS updated to EUDS

 

(16) IRM 1.35.6.1.8, Related Resources, added the following:

  • SFFAS No. 62, Transitional Amendment to SFFAS 54
  • IRM 1.35.3, Receipt and Acceptance Guidelines
  • Department of the Treasury Accounting Policy Memorandum - OFRP-25-02
  • Treasury IT Capital Planning Guide - November 2025

 

(17) Prior IRM 1.35.6.4(3), Property and Equipment Capitalization, (a) through (g) removed.

(18) IRM 1.35.6.4(5), Property and Equipment Capitalization, added “The assets are depreciated using a daily straight-line methodology. The IRS used a mid-year convention until FY23, when an accounting change was made to daily. For this reason, the AAM module contains assets on both mid-year (prior to FY23) and daily (FY23 and later) conventions”.

(19) Prior IRM 1.35.6.4(6), Property and Equipment Capitalization, removed.

(20) IRM 1.35.6.4(6), Property and Equipment Capitalization, updated threshold value table:

  • Removed Mainframe Computer Systems
  • Added Information Technology Equipment
  • Added Internal Use Software-in-Use
  • Added Internal Use Software-in-Development
  • Updated Leasehold Improvements
  • Added Vehicles
  • Removed Telecommunications Equipment
  • Updated Non-Information Technology Equipment
  • Added Right-to-Use Lease Asset
  • Added Laboratory and Forensics Equipment
  • Leasehold Improvement Construction-in-Process
  • Removed Internal Use Software
  • Removed Mainframe, server, or telecommunications software licenses
  • Removed Right-to-use (RTU) Lease
  • Removed vehicles
  • Removed Right-to-use
  • Removed Leasehold improvements

 

(21) IRM 1.35.6.4.1(1), Information Technology Equipment, added “Capitalized cost may include costs of related equipment and software if the equipment and software is integral in the functioning of the capitalized asset. For example, if the software is necessary to operate the mainframe computer system rather than to perform an application, the software is considered part of the mainframe computer and is capitalized and depreciated, accordingly”.

(22) Prior IRM 1.35.6.4.1(2),(4),(5),(6), Information Technology Equipment, removed.

(23) Prior IRM 1.35.6.4.2(1)(2), Non-IT Equipment, removed.

(24) Prior IRM 1.35.6.4.4(2),(3),(4a),(4b),(6),(7),(8),(9),(10), Internal Use Software, removed.

(25) IRM 1.35.6.4.4(5), Internal Use Software, added “The capitalization threshold for internal use software is based on Treasury’s definition of a major project, the capitalization threshold is $5 million per project.”

(26) Prior IRM 1.35.6.4.5, Investigative or Forensic Equipment, changed section title to “Enforcement, Investigative, Laboratory, and Forensic Equipment.

(27) Prior IRM 1.35.6.4.5(1), Investigative or Forensic Equipment removed.

(28) IRM 1.35.6.4.5 (1), Enforcement, Investigative, Laboratory and Forensic Equipment, added “Laboratory and forensic” equipment includes scientific instruments for forensic laboratories and fingerprinting systems”.

(29) IRM 1.35.6.4.5 (2), Enforcement, Investigative, Laboratory and Forensic Equipment, added “Enforcement and investigative equipment”.

(30) IRM 1.35.6.4.5(3), Enforcement, Investigative, Laboratory and Forensic Equipment, added “CI maintains inventory records for CI equipment/vehicles and is responsible for updating inventory records for final asset disposition”.

(31) IRM 1.35.6.4.6(1), Leasehold Improvements, added “permanent additions such as” and provided examples of permanent additions.

(32) Prior IRM 1.35.6.4.6(2), Leasehold Improvements, removed section.

(33) IRM 1.35.6.4.6(2), Leasehold Improvements, added “substantially complete”.

(34) Prior IRM 1.35.6.4.6(4), Leasehold Improvements, removed section.

(35) IRM 1.35.6.4.6(3), Leasehold Improvements, changed “If LHI is part of a Reimbursable Work Agreement, LHI is recognized when it is determined” to “If the LHI work is done under an RWA (versus third party contract), LHI is recognized when”.

(36) IRM 1.35.6.4.6(3)(a), Leasehold Improvements, changed “The provider-lessor would not be expected to derive significant residual economic benefits or services from such reimbursable work under these types of agreements” to “The lessor doesn’t receive a benefit (such as GSA), or”.

(37) IRM 1.35.6.4.6(3)(b), Leasehold Improvements, changed “The provider-lessor should expense the costs incurred for the reimbursable work and recognize reimbursement as intragovernmental revenue” to “When the lessor is intragovernmental and recognizes IRS payment as revenue”.

(38) Prior IRM 1.35.6.4.7, Leases, changed section title to “Right-to-use Leases”.

(39) IRM 1.35.6.4.7(1), Right-to-Use Leases, removed “To qualify as a lease, the underlying asset should be identified by being explicitly specified in a contract agreement. However, an asset also can be identified by being implicitly specified at the time that the asset is made available for use by the lessee”.

(40) Prior IRM 1.35.6.4.7(1)(a), Leases, removed.

(41) IRM 1.35.6.4.7(1)(c), Right-to-Use Leases, removed the IRS elected not to recognize embedded leases until October 1, 2026”.

(42) Prior IRM 1.35.6.4.7(2), Leases, removed.

(43) IRM 1.35.6.4.7(2), Right-to-Use Leases, added new paragraph and subsection (a) (b) and (c).

(44) IRM 1.35.6.4.7(3), Right-to-Use Leases, added new paragraph.

(45) Prior IRM 1.35.6.4.7.1, Lease Categories, removed section due to redundancy.

(46) Prior IRM 1.35.6.4.7.2, Lease Asset and Liability, removed section due to redundancy.

(47) Prior IRM 1.35.6.4.9(3), Vehicles, removed.

(48) Prior IRM 1.35.6.6, Verification of IFS to KISAM, removed.

(49) Prior IRM 1.35.6.7(1), Maintenance, Repair and Rehabilitation, removed “Federal agencies must fulfill property needs through redistribution, repair, or rehabilitation of already-owned furniture and office equipment.”.

(50) IRM 1.35.6.7(1), Maintenance, Repair and Rehabilitation, added “Maintenance costs are generally expensed unless they result in significant improvements, betterments, restorations, or adaptations that increase value or utility”.

(51) Prior IRM 1.35.6.7(2), Maintenance, Repair and Rehabilitation, removed.

(52) IRM 1.35.6.6(2), Maintenance, Repair and Rehabilitation, added “For procedures and guidelines for the maintaining and repairing property and equipment”.

(53) IRM 1.35.6.7(1), Impairment, added “Impairment of general PP&E is a significant and permanent decline in the service utility of PP&E, the IRS recognizes impairment for general PP&E according to SSFAS 44, Accounting for Impairment of General Property, Plant, and Equipment Remaining in Use. Impairment of IUS is when the software is no longer expected to provide substantive service potential and will be removed from service, or a significant reduction occurs in capabilities, functions, or uses of the software (or module thereof)”, “When an impairment loss is material, the IRS discloses the nature and amount of the impairment and the financial statement classification of the loss in the reporting period in which the loss is recognized, as applicable”.

(54) Prior IRM 1.35.6.8(2),(3),(4),(5), Impairment, removed.

(55) Prior IRM 1.35.6.9, Disposals, removed section due to redundancy with other sections.

(56) Minor editorial changes were made throughout this document.

Effect on Other Documents

This IRM supersedes IRM 1.35.6, dated June 28, 2024.

Audience

All business units.

Effective Date

(08-20-2026)

Todd R. Newnam
Chief Financial Officer

1.35.6.1 (08-20-2026)

Program Scope and Objectives

  1. Purpose: To provide policy and guidance for recording property and equipment transactions, ensuring data integrity and accountability.
  2. Audience: All business units
  3. Policy Owner: CFO
  4. Program Owner: Financial Reporting and Analysis office
  5. Primary Stakeholders: CFO, IT, FMSS, CI, Office of the Chief Procurement Officer (OCPO)
  6. Program Goals: To ensure accurate and timely accounting treatment for property and equipment from purchase to disposal, and accurate depreciation expense recordation, according to Federal Accounting Standards Advisory Board (FASAB) standards and Office of Management and Budget (OMB), Treasury, and IRS guidance.
1.35.6.1.1 (08-20-2026)

Background

  1. In October 1990, the Secretary of the Treasury, the Director, Office of Management and Budget, and the Comptroller General established the FASAB by a memorandum of understanding (MOU). The FASAB standards are recognized as generally accepted accounting principles (GAAP) for the federal government.
  2. The IRS records property and equipment at full cost in accordance with FASAB, Statement of Federal Financial Accounting Standards (SFFAS) 5, 6, 10, 44, 54, and 62 (see IRM 1.35.6.1.8, Related Resources).
  3. The IRS validates the useful life categories and capitalization thresholds periodically to verify reasonableness.
1.35.6.1.2 (09-27-2019)

Authorities

  1. The authorities for property and equipment policies are:

    1. Chief Financial Officers Act of 1990 PDF, Pub. L. No. 101-576
    2. 40 USC 524, Duties of Executive Agencies
    3. Federal Managers' Financial Integrity Act of 1982 (FMFIA) Pub. L. No. 97-255
    4. E-Government Act of 2002 PDF, Pub. L. No. 107-347
    5. 31 USC 3512, Executive Agency Accounting and Other Financial Management Reports and Plans
    6. 41 CFR, Public Contracts and Property Management, Chapters 101 and 102
    7. 41 CFR Part 102-36, Disposition of Excess Personal Property

     

1.35.6.1.3 (08-20-2026)

Responsibilities

  1. This section assigns responsibilities for:

    1. CFO and Deputy CFO
    2. Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting
    3. Director, Financial Reporting and Analysis Office
    4. Chief, FMSS
    5. Deputy Chief, FMSS
    6. OCPO
    7. Chief Information Officer (CIO)
    8. Program manager, IT Service Asset and Configuration Management (SACM)
    9. Chief, CI
    10. CI Director, Field Operations
    11. CI field offices
    12. CI Management Information System (CIMIS) equipment coordinator

     

1.35.6.1.3.1 (09-27-2019)
CFO and Deputy CFO
  1. The CFO and Deputy CFO are responsible for overseeing compliance with accounting policies for Servicewide property and equipment.
1.35.6.1.3.2 (06-28-2024)
Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting
  1. The Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting are responsible for providing Servicewide property and equipment guidance to the business units and offices, and ensuring the proper recording of property and equipment transactions on the financial statements.
1.35.6.1.3.3 (09-27-2019)
Director, Financial Reporting and Analysis Office

  1. The Financial Reporting and Analysis office is responsible for:

    1. overseeing accounting procedures and internal controls for administrative property and equipment accounting.
    2. ensuring property and equipment transactions are accurately posted to the Asset Accounting Module (AAM).

     

1.35.6.1.3.4 (08-20-2026)
Chief, Facilities Management and Security Services (FMSS)

  1. The Chief, FMSS, is responsible for setting Servicewide policies, procedures, standards and guidelines for purchasing and managing furniture, equipment and leasehold improvements by:

    1. providing central oversight and guidance for managing property and equipment.
    2. planning, negotiating, executing and managing property and equipment procurement activities.
    3. conducting internal control reviews of property and equipment.

     

1.35.6.1.3.5 (06-28-2024)
Deputy Chief, FMSS
  1. The Deputy Chief, FMSS, is responsible for receiving, evaluating and disposing of foreign gifts, decorations and unconditional (in-kind) gifts tendered to IRS employees consistent with the Foreign Gifts and Decorations Act of 1966, amended (5 USC 7342) and Delegation Order 1-24 (FMSS Property and Asset Management Desk Guide). The Deputy Chief, FMSS, also assists the Chief, FMSS, in working with the U.S. General Services Administration (GSA), which provides nationwide facilities and security services for all IRS employees and manages office space within its buildings throughout the country. These services include real estate and project management, physical security, logistics services, and environmental and safety services.
1.35.6.1.3.6 (09-27-2019)
Office of the Chief Procurement Officer
  1. The OCPO is responsible for establishing, maintaining and ensuring purchases are in accordance with Federal Acquisition Regulations, Department of the Treasury procurement policy and regulations, Internal Revenue Service Acquisition Policy (IRSAP), and Procedures, Guidance, and Information (PGI) documents.
1.35.6.1.3.7 (09-27-2019)
Chief Information Officer

  1. The CIO is responsible for:

    1. managing all IRS IT resources.
    2. delivering and maintaining modernized information systems throughout the IRS, including information security policies, procedures and control techniques to address system security planning and all applicable needs.
    3. ensuring information systems maintain an approved security plan, are authorized to operate and can report of all security-related activities.
    4. coordinating all policy issues related to information systems security including: computer security, telecommunications security, operational security, certificate management, electronic authentication, disaster recovery and critical infrastructure protection related to cyber threats.

     

1.35.6.1.3.8 (06-28-2024)
Program Manager, Information Technology End User Digital Services (EUDS), Operations Service Support
  1. The program manager, IT EUDS, Operations Service Support, is responsible for overseeing and managing IT assets enterprise-wide that meet the established criteria set forth in the annual established Inventory Certification Plan.
1.35.6.1.3.9 (09-27-2019)
Chief, CI

  1. The Chief, CI, is responsible for:

    1. maintaining and coordinating the inventory, control and accountability of all CI investigative and non-investigative equipment.
    2. establishing uniform rules and guidelines for CI equipment assignment, use, application and loan to maintain proper security and to prolong service life.
    3. providing an electronic extract of CIMIS data to requestors.
    4. allocating CI equipment to field offices.
    5. fulfilling all roles of a property manager, including records accountability.
    6. coordinating CI procurement requirements with CI Procurement personnel.
    7. ensuring accurate asset record-keeping in CIMIS.

     

1.35.6.1.3.10 (09-27-2019)
CI Director, Field Operations

  1. The CI director, Field Operations, is responsible for:

    1. maintaining an accurate record of all investigative equipment, investigative accessories and investigative supplies assigned to the Director, Field Operations.
    2. designating an area CIMIS equipment coordinator responsible for training new operators and providing aid to the field office equipment coordinators within their area.

     

1.35.6.1.3.11 (09-27-2019)
CI Field Offices
  1. The CI Field Offices are responsible for maintaining an accurate record of all investigative equipment.
1.35.6.1.3.12 (06-28-2024)
Criminal Investigation Management Information System Equipment Coordinator

  1. The CIMIS equipment coordinator is responsible for:

    1. ensuring information for access to CIMIS is provided by new users to the CIMIS user administrator.
    2. ensuring all users are aware of security procedures.
    3. offering all excess equipment to all other field offices before disposal.
    4. ensuring physical inventory of investigative equipment is completed, documented and reported to the Asset Knowledge Management (AKM) within the prescribed time frame in the fourth quarter of each fiscal year.

     

1.35.6.1.4 (09-27-2019)

Program Management and Review

  1. Program Reports - The IRS uses the Integrated Financial System (IFS) as its official financial system of record and reports the historical cost, depreciation and net book value of property and equipment in the IRS annual financial statements according to FASAB, OMB, and Department of Treasury guidance.
  2. Program Effectiveness - The effectiveness is measured by ensuring that all asset classifications are valid and recorded timely and accurately at the appropriate thresholds.
1.35.6.1.5 (08-20-2026)

Program Controls

  1. The Financial Reporting and Analysis office implements controls to ensure reasonable assurance that the property and equipment balances are accurate by:

    1. ensuring property, equipment, leases and expense transactions greater than IRS thresholds are classified timely and correctly.
    2. ensuring disposals are recorded timely and properly.
    3. reconciling property and equipment on AAM to external inventory systems, IRWORKS and CIMIS.
    4. reconciling the AAM sub-ledger to the General Ledger.
    5. ensuring depreciation runs and records correctly to the General Ledger.
    6. segregating duties within IFS access control.

     

1.35.6.1.6 (08-20-2026)

Terms and Definitions

  1. The following terms and definitions apply to this program.

    1. Acquisition cost - The original cost of an asset to the government, which is the amount recorded in the financial and accounting records. This includes all costs incurred to bring the asset to a form and location suitable for its intended use.
    2. Asset - Tangible or intangible items owned by the federal government that have probable economic benefits that can be obtained or controlled by a federal government entity.
    3. Book value - The amount at which an asset or a liability is carried on the books (also referred to as carrying value or amount). It equals the gross or nominal amount of an asset less any allowance or valuation amount.
    4. Capitalize - To record a cost as an asset rather than an expense.
    5. Commercial Off-The-Shelf (COTS) software - Software that is bought from a vendor and is ready to use with little or no changes.
    6. Criminal Investigation Management Information System (CIMIS) - A database system used by Criminal Investigation (CI) to track asset management activities for the full life cycle of non-IT and sensitive law enforcement equipment from acquisition to disposal.
    7. Depreciation - The systematic and rational allocation of the acquisition cost of an asset, less its estimated salvage or residual value, over its estimated useful life.
    8. Direct costs - Costs assigned to activities by direct tracing of units of resources consumed by individual activities. A cost that is specifically identified with a single cost object.
    9. Indirect costs - Costs that cannot be identified specifically or traced to a given cost object economically.
    10. Impairment, general PP&E other than IUS - A significant and permanent decline in the service utility of general property and equipment or expected service utility for construction or other asset work in process.
    11. Impairment, IUS - The software is no longer expected to provide substantive service potential and will be removed from service, or a significant reduction occurs in the capabilities, functions, or uses of the software (or a module thereof)
    12. Internal use software (IUS) - Software that is bought from commercial vendors “off-the-shelf” (COTS), internally developed, or contractor-developed, solely to meet the entity's internal or operational needs.
    13. Intragovernmental lease - An intragovernmental lease is a contract or agreement occurring within a consolidation entity or between two or more consolidation entities whereby one entity (lessor) conveys the right to control the use of Property and Equipment (PE) (the underlying asset) to another entity (lessee) for a period of time as specified in the contract or agreement in exchange for consideration.
    14. Lease, Right-to-Use (RTU) - A right-to-use lease is defined as a contract or agreement whereby one entity (lessor) conveys the right to control the use of the equipment (the underlying asset) to another entity (lessee) for a period of time as specified in the contract or agreement in exchange for consideration
    15. Net book value - The net amount an asset or group of assets is carried on the books. It is based on the historical cost (gross amount) of the asset less any depreciation, amortization, or impairment costs against the asset.
    16. Probable - The IRS follows the FASAB consideration of probable, to equate to more likely than not (>50% probability).
    17. Product category code (PCC) or material group code (MGC) - A data element used to group materials and services according to their characteristics. The PCC/MGC can be associated with one commitment item and more than one Federal Supply Codes (FSC).
    18. SAP Shopping cart - A virtual document used in the SAP Supplier Relationship Management (SRM) system that allows users to create and manage purchase requests for goods and services, including property and equipment through an appointed procurement office via a warranted Contracting Officer.
    19. Short-term lease - A lease with a term of 24 months or less.
    20. Service utility - the expected usable capacity at acquisition.
    21. Useful life - The expected operating life of an asset used for depreciation.

     

1.35.6.1.7 (08-20-2026)

Acronyms

  1. The following acronyms apply to this program.

    ACRONYMDESCRIPTION
    AAMAsset Accounting Module
    AKMAsset Knowledge Management
    CIMISCriminal Investigation Management Information System
    CIOChief Information Officer
    EUDSEnd User Digital Services
    FASABFederal Accounting Standards Advisory Board
    GSAU.S. General Services Administration
    IFSIntegrated Financial System
    IRSAPInternal Revenue Service Acquisition Policy
    IUSInternal Use Software
    LHILeasehold Improvements
    MOUMemorandum of Understanding
    MGCMaterial Group Code
    PEProperty and Equipment
    PCCProduct Category Code
    PGIProcedures, Guidance, and Information
    SAP PPSSAP Procurement for Public Sector
    RTURight-to-use
    SFFASStatement of Federal Financial Accounting Standards
1.35.6.1.8 (08-20-2026)

Related Resources

  1. OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget
  2. OMB Circular No. A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, Appendix C: Discount Rates for Cost-Effectiveness, Lease-Purchase, and Related Analyses
  3. OMB Circular No. A-136, Financial Reporting Requirements
  4. SFFAS No. 5, Accounting for Liabilities of the Federal Government PDF
  5. SFFAS No. 6, Accounting for Property, Plant, and Equipment PDF
  6. SFFAS No. 10, Accounting for Internal Use Software PDF
  7. SFFAS No. 44, Accounting for Impairment of General Property, Plant, and Equipment Remaining in Use PDF
  8. SFFAS No. 54, Leases PDF
  9. SFFAS No. 62, Transitional Amendment to SFFAS 54
  10. IRM 1.14.4, Personal Property Management
  11. IRM 1.35.3, Receipt and Acceptance Guidelines
  12. IRM 2.149.1, Asset Management Policy
  13. IRM 2.149.2, Asset Management Process Description
  14. IRM 2.149.3, Asset Management Hardware Procedures
  15. IRM 2.149.4, Asset Management Software Procedures
  16. IRM 9.10.1, Criminal Investigation Management Information System Equipment Inventory
  17. IRM 9.11.3, Investigative Property
  18. Procurement Policy Framework
  19. Financial Management Codes Handbook
  20. Department of the Treasury Accounting Policy Memorandum – OFRP-25-02
  21. Treasury IT Capital Planning Guide – November 2025
1.35.6.2 (09-27-2019)

Acquisition of Goods and Services

  1. This section provides guidance on procuring goods and services.
1.35.6.2.1 (06-28-2024)

Shopping Cart Process

  1. Requester electronically prepares and tracks shopping carts (requisitions) in the SAP PPS module. The shopping cart must be complete and contain the proper approvals, technical documentation and funding information to be acceptable for processing. The requester, approver, and financial plan manager validate the accounting string and ensure the product category code (PCC) and material group code (MGC) comply with the Financial Management Codes Handbook.
  2. See Procurement Knowledge Base for more information.
1.35.6.2.2 (09-27-2019)

Procurement Process

  1. Procurement is responsible for the centralized purchase of goods and services for their assigned business units.

    1. Procurement staff use the SAP PPS module to generate shopping cart documents for executing new orders, modifying existing orders and obligating funds.
    2. See Procurement Policy Framework andIFS-PPS Resource Center for more information.

     

1.35.6.2.3 (09-27-2019)

Receipt and Acceptance Process

  1. See IRM 1.35.3, Receipt and Acceptance Guidelines, for more information.
1.35.6.3 (06-28-2024)

Recording Property and Equipment Transactions

  1. The Financial Reporting and Analysis office is responsible for ensuring property and equipment is recorded correctly and presented fairly in the financial statements and conforms to FASAB and OMB guidance. This includes:

    1. Reclassifying and recording: The Financial Reporting and Analysis office extracts and compiles capitalized amounts for internal use software and leasehold improvements initially recorded as an operating expense, reclassifies assets and expenses, and records disposals.
    2. Financial reporting: Net property and equipment and right-to-use leases are reported on the balance sheet. Depreciation expense, gains and losses are reported as a program cost or earned revenue on the Statement of Net Cost.

     

1.35.6.4 (08-20-2026)

Property and Equipment Capitalization

  1. This section provides guidance for the capitalization and depreciation of property and equipment.

  2. According to SFFAS No. 6, Accounting for Property, Plant, and Equipment PDF, property and equipment must meet the following criteria to be capitalized:

    1. Have an estimated useful life of two or more years
    2. Not be intended for sale in the ordinary course of operations
    3. Be acquired, constructed or developed with the intention of being used or available for use by the entity

     

  3. Capitalized cost includes all costs necessary to bring the asset to the form and location for its intended use, such as amounts paid to vendors, transportation, handling and storage, labor, installation, integration, and other direct and indirect production costs.
  4. The useful life of an asset is determined by factors such as physical wear and tear and technological changes that affect the asset’s economic usefulness.
  5. The assets are depreciated using a daily straight-line methodology. The IRS used a mid-year convention until FY23, when an accounting change was made to daily. For this reason, the AAM module contains assets on both mid-year (prior to FY23) and daily (FY23 and later) conventions.

  6. The following table summarizes the IRS equipment type, threshold value and useful life for each type of capitalized property and equipment:

    EQUIPMENTTHRESHOLD VALUEUSEFUL LIFE
    Information Technology Equipment$50,0005 years
    Internal Use Software-in-Use$5,000,000 per project*7 years
    Internal Use Software-in-DevelopmentN/AN/A
    VehiclesNo threshold5 years
    Non-Information Technology Equipment$50,0005 years
    Right-to-Use Lease Asset$1,700,0002 to 5 years
    Laboratory and Forensics Equipment$50,0005 years
    Leasehold Improvements$750,000The lesser of 10 years or the remaining life of the lease
    Leasehold Improvements Construction-in-ProcessN/AN/A

    *Major projects are defined by Treasury. See IRM 1.35.6.4.4, Internal Use Software

1.35.6.4.1 (08-20-2026)

Information Technology Equipment

  1. IT equipment generally consists of mainframes, servers, printers, and telecommunications equipment. Capitalized cost may include costs of related equipment and software if the equipment and software is integral in the functioning of the capitalized asset. For example, if the software is necessary to operate the mainframe computer system rather than to perform an application, the software is considered part of the mainframe computer and is capitalized and depreciated, accordingly. However, if the software exceeds the capitalization threshold, it is reported separately.
  2. IT maintains inventory records for IT equipment and is responsible for updating inventory records for final asset disposition.
1.35.6.4.2 (08-20-2026)

Non-IT Equipment

  1. Non-IT equipment includes, but is not limited to:

    1. automated file storage equipment
    2. equipment for producing, storing and viewing microforms
    3. document processing equipment for photocopies, mail and check handling, and shredders
    4. television studio, cameras and other photographic equipment
    5. printing and binding equipment
    6. office equipment, devices and machines other than IT equipment
    7. uninterruptible power supplies (UPS)

     

  2. The FMSS territory staff maintains inventory records for non-IT equipment and is responsible for updating inventory records for final asset disposition.
1.35.6.4.3 (04-23-2021)

Furniture and Fixtures

  1. Purchases of furniture and fixtures, such as tables, desks and chairs - with the exception of those related to leasehold improvements - are not capitalized.
1.35.6.4.4 (08-20-2026)

Internal Use Software

  1. Internal use software (IUS) consists of Commercial Off-the-Shelf (COTS) software and internally developed software and is capitalized and amortized over the useful life according to SFFAS No. 10, Accounting for Internal Use Software PDF and FASAB Technical Release 16, Implementation Guidance for Internal Use Software PDF.
  2. For internally developed software, capitalized cost includes both direct and indirect cost (full cost) incurred during the software development stage, such as salaries of programmers, system analysts, project managers, and administrative personnel, associated employee benefits, outside consultant’s fees, rent, supplies, and documentation manuals.
  3. Costs incurred during the preliminary design stage (i.e., conceptual formulation, design and testing of alternatives) and cost incurred after software deployment (i.e., data conversion, maintenance and support) are expensed.
  4. Costs for internal use software are accrued in an in-development account. Upon completion of the final acceptance testing and the software is placed in service, costs in the in-development account are transferred to the deployed systems account and amortization begins. Costs incurred after deployment are expensed.
  5. The capitalization threshold for internal use software is based on Treasury’s definition of a major project, the capitalization threshold is $5 million per project.
1.35.6.4.5 (08-20-2026)

Enforcement, Investigative, Laboratory and Forensic Equipment

  1. “Laboratory and forensic” equipment includes scientific instruments for forensic laboratories and fingerprinting systems.
  2. “Enforcement and investigative” equipment, such as firearms, surveillance and night vision equipment, telescopes, optical equipment, and body armor, are expensed.
  3. CI maintains inventory records for CI equipment/vehicles and is responsible for updating inventory records for final asset disposition.
1.35.6.4.6 (08-20-2026)

Leasehold Improvements

  1. Leasehold improvements (LHI) are alterations to leased property that extend the useful life of leased space or increase the usefulness of the leased space including permanent additions such as:

    1. building alterations to plumbing, power-plant boilers, fire alarm systems, refrigerating systems, security systems, flooring, and carpeting
    2. landscaping, fences, sewers and parking lots

     

  2. LHI costs are tracked in a construction-in-progress account until the project is substantially complete

  3. If the LHI work is done under an RWA (versus third-party contract), LHI is recognized when:

    1. the lessor doesn’t receive a benefit (such as GSA), or
    2. when the lessor is intragovernmental and recognizes IRS payment as revenue

     

1.35.6.4.7 (08-20-2026)

Right-to-Use Leases

  1. Under SFFAS No. 54 Leases, a lease is a contract or agreement whereby one entity (lessor) conveys the right to control the use of property, plant, and equipment (the underlying asset) to another entity (lessee) for a period of time as specified in the contract or agreement in exchange for consideration.

    1. To determine whether a contract or agreement conveys the right to control the use of the underlying asset, assess whether the contract or agreement gives the lessee both of the following:

       

      • the right to obtain economic benefits or services from use of the underlying asset as specified in the contract or agreement; and
      • the right to control access to the economic benefits or services of the underlying asset as specified in the contract or agreement

       

       

    2. Complex contracts or agreements may contain (1) both lease (for example, right to use a building) and non-lease (for example, maintenance services) components and/or (2) leases of multiple underlying assets. Such lease components are often referred to as “embedded leases” but this term was not used in SFFAS 54. SFFAS 54 paragraphs 72-77 provide guidance for identifying such leases and assigning costs to individual lease components for accounting purposes.

     

  2. A lessee should initially measure the lease asset as the sum of the following:

    1. the amount of the initial measurement of the lease liability
    2. lease payments made to the lessor at or before the commencement of the lease term, less any lease incentives
    3. initial direct lease costs that are necessary to place the lease asset into service.

     

  3. A lease asset should be amortized in a systematic and rational manner over the shorter of the lease term or the useful life of the underlying asset, except as provided in paragraph 51, SFFAS 54. The amortization of the lease asset should be reported as amortization expense.
1.35.6.4.8 (05-05-2014)

Treasury Franchise Fund

  1. The IRS does not capitalize property and equipment bought and held by the Treasury Franchise Fund (TFF). Depreciation of TFF allocated to the IRS by Treasury is based on pro rata share of usage.
1.35.6.4.9 (08-20-2026)

Vehicles

  1. Vehicles are purchased or leased from GSA.
  2. When purchased, vehicles are capitalized and depreciated over a five-year useful life.
1.35.6.5 (06-28-2024)

Physical Security Protection

  1. To comply with Department of the Treasury, Interagency Security Committee (ISC), and IRS protection standards and policies, the IRS has established physical security protection methods.
  2. Due to monetary value, importance, or vulnerability posed by its loss or compromise, specific IRS assets or equipment may require security measures in addition to being within secured IRS spaces.
  3. See IRM 10.2.14, Methods of Providing Protection, for more information.
1.35.6.6 (08-20-2026)

Maintenance, Repair and Rehabilitation

  1. Maintenance costs are generally expensed unless they result in significant improvements, betterments, restorations, or adaptations that increase value or utility.
  2. For procedures and guidelines for the maintaining and repairing property and equipment see IRM 1.14.4, Personal Property Management; IRM 2.149.1, Asset Management Policy; IRM 2.149.2, Asset Management Process Description; IRM 2.149.3, Asset Management Hardware Procedures; IRM 2.149.4, Asset Management Software Procedures; and IRM 9.11.3, Investigative Property .
1.35.6.7 (08-20-2026)

Impairment

  1. Impairment of general PP&E is a significant and permanent decline in the service utility of PP&E, the IRS recognizes impairment for general PP&E according to SSFAS 44, Accounting for Impairment of General Property, Plant, and Equipment Remaining in Use PDF. Impairment of IUS is when the software is no longer expected to provide substantive service potential and will be removed from service, or a significant reduction occurs in the capabilities, functions, or uses of the software (or a module thereof), the IRS recognizes impairment for IUS according to SFFAS 10, Accounting for Internal Use Software. PDF When an impairment loss is material, the IRS discloses the nature and amount of the impairment and the financial statement classification of the loss in the reporting period in which the loss is recognized, as applicable.