PROPERTY, PLANT AND EQUIPMENT CAPITALIZATION POLICY

OBJECTIVES

This policy outlines, in general terms, the definition, costing, and guidelines for the capitalization
of property and equipment acquisitions.

I. DEFINITIONS

Property, Plant and Equipment (PPE), include all tangible and intangible assets acquired or
constructed for use in the operation of the Company, whose use or consumption will cover
more than one year. It does not include those assets acquired as investments, assets for sale and
library books.

The Company classifies its capital assets into the following categories for reporting purposes:

Asset Class Definition

LAND Land owned and is used for business operations
LAND IMPROVEMENTS Improvements outside the periphery of the building, such as
landscapes, roadway, tunnels, and other site development works
AIRCON UNITS Individual air conditioner units installed in certain laboratories
and/or offices
BUILDINGS Buildings used for business operations
BUILDING Improvements on buildings which materially extend its useful life
IMPROVEMENTS and/or increase its value
COMPUTER SOFTWARE Intangible assets, such as system and licenses, necessary in the
performance of usual business operations
COMPUTER UNITS Computer units and ancillary equipment used in classrooms and
offices
FURNITURE & FIXTURES Movable equipment used to furnish an office or classroom
LABORATORY Equipment used in student laboratories
EQUIPMENT
OFFICE EQUIPMENT Equipment deployed in offices used in normal office operations
ATHLETIC EQUIPMENT Equipment used for sports activities
TRANSPORTATION Transportation vehicle owned by the University used in business
EQUIPMENT operation
TOOLS & OTHER Other equipment not belonging to the classification above
EQUIPMENT

II. COSTING

Property and Equipment are initially stated at cost. Initial Cost includes the purchase price and
any directly attributable cost in bringing the assets to its working condition and location for its
intended use. Except for Land and Construction in Progress, PPE are subsequently stated at cost
less accumulated depreciation, amortization and any impairment loss in the statement of
financial position.

Land is stated at cost and is not subject for depreciation. However, it may be tested for any
impairment loss, which shall be deducted from the initial cost recorded in the books.

Construction in Progress pertains to property under construction and is stated at cost. Cost
includes costs of construction, labor and other direct costs. CIP is not depreciated until such
time that the relevant assets are completed and available for operational use. Upon the substantial
completion of the general construction works of a project, management may, at its discretion,
reclassify the Construction in Progress relative to the project to its corresponding PPE accounts,
provided, it is ready for its intended purpose as evidenced by the Certificate of Occupancy given
by the Local Government Unit. Depreciation will start upon the commencement of the actual

Page 1 of 3
use of the asset. Management may, at its discretion, reclassify the Construction in Progress to its
corresponding PPE account once the project has been substantially completed (e.g. >80% w
ork accomplishment), then start its depreciation upon the commencement of its actual use.

III. CAPITALIZATION FRAMEWORK

Below is the established threshold for the capitalization of capital expenditures:

a) An item or equipment which can be used for more than 1 year;

b) An item or equipment with unit cost of P10,000 or more;
c) A group or lot of equipment whose aggregate purchase cost totaled P100,000 or more, even
if the individual cost is below P10,000;
d) Repair works or services conducted which are non-recurring, and which increased the value
or useful life of an existing asset, costing P100,000 or more.

Expenditures that meet the basic framework defined above must be capitalized. Expenditures
that do not meet the threshold or those repairs which do not add value to the existing property
and equipment shall be expensed outright.

IV. DEPRECIATION

Depreciation and amortization are calculated on a straight-line basis over the estimated useful
lives of the assets as follows:

Asset Class Useful Life in Years

LAND -
LAND IMPROVEMENTS 20 years
AIRCON UNITS 5 years
BUILDINGS 25 years
BUILDING IMPROVEMENTS 25 years
COMPUTER SOFTWARE 5 years or contract life, whichever is shorter
COMPUTER UNITS 2 years
FURNITURE & FIXTURES 5 years
LABORATORY EQUIPMENT 4 years
OFFICE EQUIPMENT 5 years
ATHLETIC EQUIPMENT 5 years
TRANSPORTATION EQUIPMENT 5 years
TOOLS & OTHER EQUIPMENT 5 years

Depreciation and amortization commence when the property and equipment is in its location or
condition capable of being operated in the manner intended by management.

A full-month depreciation shall be taken on the month of acquisition if the capitalized asset was
purchased on the 1st-15th day of the month. If the capitalized asset was purchased on the 16 th-
30th day of the month, depreciation shall commence on the immediately following month.

Depreciation and amortization ceases at the earlier of the date that the property and equipment
is classified as held-for-sale and the date the property and equipment is derecognized. The
estimated useful life and depreciation and amortization method are reviewed periodically, and
adjusted prospectively, if there is an indication of a significant change since last reporting date,
to ensure that these are consistent with the expected pattern of economic benefits from items of
property and equipment.

Fully depreciated assets are retained in the accounts until these are no longer in use and no
further charge of depreciation and amortization is made in respect of those assets.

Page 2 of 3
V. DISPOSITION

When items of property and equipment are retired or otherwise disposed of, the cost and
related accumulated depreciation and amortization and any impairment in value are removed from the
accounts and any resulting gain or loss is charged to the statement of comprehensive income.

An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising from de-recognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the asset) is included in the statement of comprehensive income for the period when the
asset is derecognized.

Prepared by:

Norielyn M. Apoloan
Asst. Chief Accountant

Noted by:

Sandra Bianca SD. Sandejas

Chief Accountant

Dr. Maria Teresa O. Pilapil

Vice President for Administration

Approved by:

Sarah L. Lopez
Vice President for Finance

Page 3 of 3