Prepaid Expense Policy

Owner	Administration and Finance
Contact	[email protected]
Document Type	Policy
Issue Date	March 2019
Last Review	February 2025
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Contents

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1. Scope
2. Policy
3. Contacts

To establish guidelines for the recognition, recording, and amortization of prepaid expenses to ensure accurate financial reporting. In accounting, a prepaid expense is a cost paid in advance for goods or services that will be received or used in the future, initially recorded as an asset on the balance sheet, and then expensed as the benefit is realized.

A. Scope

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This policy applies to all departments and units within the organization. Prepaid expenses are payments made in advance for goods or services to be received in the future. These expenses are initially recorded as assets and expenses over the period they benefit.

B. Policy

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Prepaid expenses should be recognized when payment is made for goods or services that will be received in a future period. Examples include insurance premiums, rent, subscriptions, and maintenance contracts.

Prepaid expenses greater than $100,000 will be recorded as current assets on the balance sheet using the account code "Prepaid Expenses." These expenses must be amortized over the period(s) they benefit, with the amortized portion recognized as an expense in the same fiscal year in which the benefit is received.

Prepaid expenses at or below $100,000 may be expended immediately if deemed immaterial to financial reporting.

It is the responsibility of the department initiating the purchase and its FOAP manager to ensure that prepaid expenses are properly documented and approved.

C. Contacts

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For more information, please contact the following departments:

• Finance Office