Adoption of Fixed Asset Capitalization Policy
Meeting Date: June 29, 2010 Primary Staff Contact: Lee Tuneberg
Department: Administrative Services E-Mail: [email protected] Secondary Dept.: None Secondary Contact: None
Approval: Martha Bennett Estimated Time: Consent
Question:
Does Council have any questions about the Fixed Asset Capitalization Policy as presented?
Staff Recommendation:
Staff recommends Council accept the Fixed Asset Capitalization Policy as presented.
Background:
The Administrative Services Department just finished the interim audit. At the interim audit, is where the auditors notify our department of any new pronouncements that need to be adopted and
implemented for the fiscal year. The pronouncement that is new to this fiscal year is one that relates to recognizing intangible assets. The Governmental Accounting Standard Board (GASB) defines
intangible assets as easements, water rights, timber rights, patents trademarks and computer software. GASB No. 51 goes further and defines Intangible Assets that are internally development.
The City has a Fixed Assets Capitalization policy that has been in effect since 2000. At this time we are not recommending changing the current policy, only to add a section for Intangible Assets. This will make our policy current with the new GASB Pronouncement No. 51.
This policy states that any asset that is internally development will be capitalized if the actual or estimated cost is $25,000 or more. The useful life of the assets will be determined by the developing department, the Administrative Services Department and the City Administrator.
Related City Policies:
None
Council Options:
Council may accept this policy as presented, recommend modifications as discussed or defer acceptance (takes no action) awaiting further information or clarification.
City of Ashland
Fixed Asset Capitalization Policy June 30, 2000
CAPITALIZATION POLICY
I. Land:
A. Land is categorized into three groups:
1. Land which constitutes all City owned property
other than easements which are not capitalized.
2. Dedicated Park Land which constitutes property
dedicated by City council as perpetual parkland and
3. Open Space Land, which constitutes property
dedicated by City council as designated open space park.
B. Land is valued at cost or fair-market value at the time
of acquisition.
C. Land is not depreciable.
D. Effective July 1, 1993, Land will be accounted for in
the General Fixed Asset Group when acquired by other than an Enterprise or Internal Service Fund type. Land acquired by Enterprise and Internal Service Fund types will be accounted for in the fund of acquisition. All joint Fund purchases will be accounted for in the
General Fixed Asset Group.
E. Water Rights shall be accounted for in the same manner
as Land with the exclusion, all Water Rights will be the property of the Water Enterprise Fund.
II. Buildings:
A. The basis of a building will include fixtures and
attachments permanently fixed to the structure such as light fixtures, wiring, plumbing, and HVAC.
1. The basis will be adjusted for improvements with a
value of $5,000 or greater.
2. Buildings shall have a minimum combined value of
$5,000 to be capitalized.
B. Buildings that are the property of a Proprietary
Enterprise or Internal Service Fund type shall be depreciable with a standard life of fifty years. All other buildings although not depreciable will have a standard life of fifty years.
III. Equipment:
A. Small Equipment shall have a Minimum Value of $5,000 to
be capitalized, unless a complement of lesser purchases are ancillary pieces of a unit. Depreciation shall be straight\line based on a useful life of not less than seven years and not greater than twenty years.
B. Vehicles shall constitute passenger cars and pickups of
less than an one ton rating and shall be the Property of the Equipment Fund. If purchased by any fund other than the Equipment Fund, they will be contributed to the Equipment Fund on June 30, of the year of
acquisition. Depreciation shall be straight\line based on a useful life of not less than five years and not more than seven, except in the case of police patrol cars which shall have a useful life of not less than two years and not more than three years.
C. Computer Network and Peripherals shall constitute any
microcomputer hardware, printer, or other peripheral connected to the Primary City Computer Network. All microcomputer hardware, printer, or other peripherals connected as such shall be the property of the Central Services Fund, if purchased by any fund other than the Central Services Fund they will be contributed to the Central Services Fund on June 30, of the year of
acquisition. Depreciation shall be straight\line based on a three year life.
D. Rolling Stock shall constitute any piece of rolling
stock not classified as a vehicle (ie passenger car or pickup). All Heavy Equipment shall be the Property of the Equipment Fund, if purchased by any fund other than the Equipment Fund, they will be contributed to the Equipment Fund at June 30, of the year of acquisition.
Depreciation shall be straight\line based on a useful life of not less than seven years and not greater than twenty years.
E. Depreciation shall be straight\line with a useful life
equivalent to current industry standard for the material used. Depreciation will use a zero year
convention through June 30, 2001, and all acquisitions after will use a half year convention.
IV. Improvements Other than Buildings:
A. Electric System Improvements:
1. Improvements shall be accounted for based on
standard FERC codes with capitalization thresholds compliant with FERC regulations.
a. Depreciation shall be straight\line with a
useful life equivalent to current industry standard for the material used. Depreciation will use a zero year convention through June 30, 2001, and all acquisitions after will use a half year convention.
b. Poles,Towers&Fixtures - Poles, framing,
insulators and other fixtures included in their construction. Life - forth-five years
c. Overhead Conductors - Overhead Wire and the
labor included in it's installation. Life -fifty years.
d. Underground Conduit - Materials as listed
below, and labor included in installation. Life - seventy-five years.
e. Underground Conductors - Underground wire
and the labor included in it's installation. Life - forty years.
f. Transformers - Transformers and bases and the
labor included in it's installation. Life -forty years.
g. Services - Conductors and labor from
Distribution point to Meter. Life - fifteen years
h. Meters - Measurement device and the labor
included in it's installation. Life - ten years.
i. Street Lights - Fixtures and illuminators
for street lights and signals and the labor included in it's installation. Life
IV. Improvements Other than Buildings:
B. Water System Improvements:
1. Water System Improvements shall be categorized in
the following method:
a. Reservoirs and Dams which include open and
enclosed water storage or retainage facilities.
b. Transmission and Distribution:
1)Transmission which includes water mains and appurtenances to transmit and distribute water from storage to treatment to storage. 2)Distribution which includes water mains and
appurtenances to distribute water from storage to service.
c. Treatment Facility which includes
improvements, mains and appurtenances
directly related to the treatment of water.
d. Services which includes devices, mains and
appurtenances necessary to facilitate delivery of water from distribution to a customer.
2. A capitalization threshold of $5,000 shall be used
to determine which improvements will be
capitalized. However, in the case of replacement of existing infrastructure, regardless of cost a minimum of three hundred fifty (350) consecutive lineal feet is required to qualify as a capital replacement. Any amount less is considered diminimus and therefore deemed maintenance.
IV. Improvements Other than Buildings:
B. Water System Improvements:
a) Valuation:
1) Historical cost for the existing system,
including contributions to the system by developers, will be based on the
existing inventory of infrastructure maintained by the Public Works
department. The inventory includes
type, size, footage, and year installed. Historical depreciation shall be
computed based on the following criteria:
Type of Pipe Life
Concrete 50 yrs
Cast Iron 50 yrs
Asbestos\Cement 20 yrs
Ductile Iron 50 yrs
PVC 50 yrs
Galvanized 15 yrs
Coated Steel 50 yrs
Dams and Reservoirs 100 yrs
Pumping Stations 20 yrs
Pressure Reduction Valves 20 yrs
Treatment Facilities 20 yrs
IV. Improvements Other than Buildings: B. Water System Improvements:
b) Costing:
1) Historical Costing is available for improvements constructed by Public Works crews after 1970 and will be used when available.
Contributions made during that period will be based on the same per footage cost as those improvements made by Public Works crews.
2) Improvements made prior to 1970, whether
contributed or by Public Works crews will be based on Current Engineering News Record Construction Cost Index.
3. Future improvements will be valued at cost. b) Depreciation shall be straight\line with a
useful life equivalent to current industry standard for the material used. Depreciation will use a zero year convention through June 30, 1993, and all acquisitions after will use a half year
IV. Improvements Other than Buildings: C. Sewerage System Improvements
1. Sewerage System Improvements shall be categorized in the following method:
a. Collection which includes mains and appurtenances
to collect and transmit sewerage from service to treatment.
b. Treatment Facility which includes improvements,
mains and appurtenances directly related to the treatment of sewerage.
c. Services which includes devices, mains and
appurtenances necessary to facilitate collection of sewerage from customer to collection.
2. A capitalization threshold of $5,000 shall be used to determine which improvements will be capitalized. However, in the case of replacement of existing
infrastructure, regardless of cost a minimum of three hundred fifty (350) consecutive lineal feet is
required to qualify as a capital replacement. Any amount less is considered diminimus and therefore deemed maintenance.
a) Valuation:
1) Historical cost for the existing system as of June 30, 1991, including contributions to the system by developers, will be based on the
existing inventory of infrastructure maintained by the Public Works department. The inventory includes type, size, footage, and year
installed. Historical depreciation shall be computed based on the following criteria:
Type of Pipe Life
Concrete 50 yrs
Cast Iron 50 yrs
Ductile Iron 50 yrs
PVC 50 yrs
Orangeburg 25 yrs
Asbestos Cement 50 yrs
IV. Improvements Other than Buildings: C. Sewerage System Improvements
2) Costing:
a) Historical Costing is available for improvements constructed by Public Works crews after 1970 and will be used when available. Contributions made during that period will be based on the same per footage cost as those improvements made by Public Works crews.
b) Improvements made prior to 1970, whether
contributed or by Public Works crews will be based on Current Engineering News Record Construction Cost Index.
3) Future improvements will be valued at cost.
a) Depreciation shall be straight\line with a useful life equivalent to current industry standard for the material used. Depreciation will use a zero year convention through June 30, 1993, and all acquisitions after will use a half year
IV. Improvements Other than Buildings:
D. General Fixed Asset Group improvements: 1. Storm Drain Improvements:
a) A capitalization threshold of $5,000 shall be used to determine which improvements will be
capitalized. However, in the case of replacement of existing infrastructure, regardless of cost a minimum of three hundred fifty (350) consecutive lineal feet is required to qualify as a capital replacement. Any amount less is considered
diminimus and therefore deemed maintenance.
b) General Fixed Asset Group Assets are not subject to
depreciation. A useful life is established only to determine replacement.
c) Valuation:
1) Historical cost for the existing system as of June 30, 1992, including contributions to the system by developers, will be based on the
existing inventory of infrastructure maintained by the Public Works department. The inventory includes type, size, footage, and year
installed. Useful life shall be computed based on the following criteria:
Type Life
Concrete 25 yrs
Cast Iron 25 yrs
Ductile Iron 25 yrs
PVC 25 yrs
Corrugated Steel 15 yrs
Corrugated Aluminum 15 yrs
Constructed Ditches 25 yrs
Pumping Stations 20 yrs
from the age of installation.
IV. Improvements Other than Buildings:
2. Street Improvements:
right-IV. Improvements Other than Buildings:
D. General Fixed Asset Group improvements: 2. Street Improvements:
d) A capitalization threshold of $15,000 shall be used to determine which improvements will be
capitalized. However, in the case of resurfacing of existing infrastructure, regardless of cost a minimum of three hundred (300) consecutive lineal feet or one block and have an overlay depth of not less than two (2) inches of new vertical surface to qualify as a capital replacement. Any amount less is considered diminimus and therefore deemed
maintenance.
e) General Fixed Asset Group Assets are not subject to depreciation. A useful life is established only to determine replacement. The useful life of Street improvements shall be as noted below:
Type Life
New Construction:
Minimum vertical depth 3" 15 yrs
Overlay\Resurface:
Minimum vertical depth 2" 10 yrs
f) Historical cost for the existing system as of June 30, 2002, including contributions to the system by developers, will be based on the inventory of
infrastructure prepared by the an independent consultant for the Public Works department. g) Future improvements will be valued at cost.
IV. Improvements Other than Buildings:
D. General Fixed Asset Group improvements: 3. Airport Improvements:
a) Airport improvements shall include runway, taxiway, aprons, fencing and electronic systems such as
beacon, VASI, REIL, and runway lights. b) Valuation:
1) Runway, taxiway, apron, fencing and electronic systems such as beacon, VASI, REIL, and runway lights prior improvements were generally made with proceeds from FAA Grants to the City of Ashland and existing improvements will be valued
Hangers 50 yrs
FBO Buildings 50 yrs
Maintenance Buildings 50 yrs
V. Construction in Progress
A. Construction in progress will be restricted to Enterprise and Internal Service Fund types, and will not be recorded in the General Fixed Asset Group.
B. Construction in progress shall include construction of Buildings and Improvements Other than Buildings begun in one fiscal year but not completed until later fiscal years.
C. Construction in progress shall remain a deferred
expenditure until completion or a period of four fiscal years. If at that time construction is not completed the deferred expenditures will be treated as an adjustment to equity in the fund where they occurred.
D. Construction in progress is not depreciable.
VI. Intangible Assets
A. To recognize intangible assets such as patents, trademarks and computer software.
B. The intangible asset must be identifiable and must be internally generated.
C. The asset must be owned by the City of Ashland.
D. The asset value must be a minimum of $25,000 (actual or estimated) to be on the fixed assets.
E. Depreciation of the Asset will be based on the useful life.
F. The asset’s useful life will be determined by the following:
a. The Department that internally development it. b. The Finance Department and