Section 3-123-8 - Depreciation and use allowances(a) Depreciation and use allowances for fully depreciated assets, are allowable to compensate contractors for the use of buildings, capital improvements, and equipment or for the provision of such facilities on a standby basis for subsequent use when such facilities are temporarily idle because of suspensions or delays not caused by the contractor, not reasonably foreseeable, and not otherwise avoidable when the contract was awarded. Depreciation is a method of allocating the acquisition cost of an asset to periods of its useful life. Useful life refers to the asset's period of economic usefulness in the particular contractor's operation as distinguished from its physical life. Use allowances provide compensation in lieu of depreciation or other equivalent costs. Consequently, depreciation and use allowances may not be combined to compensate contractors for the use of any one type of property.(b) The computation of depreciation or use allowances shall be based on acquisition costs. When the acquisition costs are unknown, reasonable estimates may be used.(c) Depreciation shall be computed using any generally accepted method, provided that the method is consistently applied and results in equitable charges considering the use of the property. The straight-line method of depreciation is preferred unless the circumstances warrant some other method. However, the State will accept any method which is accepted by the Internal Revenue Service.(d) In order to compensate the contractor for use of depreciated, contractor-owned property which has been fully depreciated on the contractor's books and records and is being used in the performance of the contract, use allowances may be allowed as a cost of that contract. Use allowances are allowable, provided that they are computed in accordance with an established industry or government schedule or other method mutually agreed upon by the parties. If a schedule is not used, factors to consider in establishing the allowance are the original cost, remaining estimated useful life, the reasonable fair market value, and the effect of any increased maintenance or decreased efficiency. The cumulative use allowance for any item of property over the course of the project shall not exceed the actual market value of that item.(e) No depreciation or use allowance will be permitted for equipment, tools, or other items having a purchase price for that new item or equivalent of less than one thousand dollars.[Eff 12/15/95; am and comp 11/17/97; am and comp 11/15/01; am and comp 11/25/02] (Auth: HRS § 103D-601) (Imp: HRS § 103D-601)