HomeMy WebLinkAbout2003-04-28 03-149 ORDERItem ROA3-169
Date: Apra 281 2003
Item/Subject: ORDER -Adopting policy for Capitalization of Fuad Assets
Responsible Department Finance
The attached policy will replace the Citys prior policy adopted by Council Order 92-285. With the
impending application of Government Accounting Standards Board (GASB) Statement 39, the City will be
required to capital'ue infrastructure assets (streets, sidewalks etc) and W depreciate its General Fund
assts. The prior policy, did not address such tapirs.
The proposed policy addresses the Citys entire fixed assets. It outlines a genera definition of what
constitutes a fixed asset, the value M be used and dollar threshold that will result in capitalization,
depreciation method, and suggested useful lives.
The largest change, other than those identified above, is within the capitalization thresholds. Current
policy requires capitalisation for expenditures ranging from $500 and up depending upon the asset class.
The proposed policy significantly increases Mat threshold to $10,000 and up. In order to address the
concern that assets held by the Ory but not subject to capitalization be properly tracked, the policy
includes a section to ensure that certain assets, whether capitalizetl or not, are appropriately tracked.
Within the section endtletl Older Assets, staff proposes Mat an inventory of firearms, radios and
computer equipment be maintained and updated at least annually.
T Department Head
Managers Comments:
This policy has been reviewed and approved. by Me Finance Committee.G f
•Ly�/L/B, Oty Manager
Order, Policy
Budget Approval:
Finance Director
Legal Alrpraval:
City Solicitor
Introduced for
X Passage
_ Frat Reading Page _ of
Referral
03-169
_ Assigned N Councilor Tremble April 28, 2003
CITY OF BANGOR
(TITLE.) Order Adopting Poligfor Capitalization of Fixed Assets
ORDERED, THAT the Policy for Capitalizabon of RxM Aaets adopted! by Council Order 92-285
is hereby repealed in ft entirety and replaced widn the attached polky.
CITY CUMCIL
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03-149
CITY OF BANGOR
PITALIZATION OF FIXED ASSETS
Purpose: This policy establishes the standards for recording the acquisition of
fixed assets. The standards include thresholds that shall be used to determine
Me capital assets, other assets to be tracked, depreciation methodology,
estimated useful lives, and the safeguarding and controlling of fixed assets.
This policy also addresses other considerations for recording and depreciating
fixed assets in order to comply with the provisions of GASB Statement No. 34.
Capital Asset Definition: Capital assets will be defined as tangible and
intangible assets that have initial useful lives that extend beyond a single
reporting pend.
Capitalization Method: All capital assets will be recorded at historical cost as
of the date acquired or constructed. If historical cost information is not
available, assets will be recorded at estimated historical cost by calculating
current replacement cost and deflating the cost using the appropriate price -level
index.
Capitalization Thresholds: The City establishes the following minimum
capitalization thresholds for capitalizing fixed assets:
Land and Improvements $25,000
Buildings and Improvements $25,000
Machinery/Equipment/Vehicles
Furniture/Fixtures $100000
Infrastructure $100,000
Detailed records shall be maintained for all fixed assets above the established
thresholds.
Infrastructure Assets: In accordance with GASB Statement 34, the City will
record, a[ a minimum, "major" infrastructure assets as defined in Statement 34
that were acquired, constructed or signifcantly reconstructed, or that received
significant improvements after June 30, 1980. Other Infrastructure assets may
be capitalized as deemed appropriate. The City does not intend to use the
.modified approach" to record Infrastructure.
Other assets: Detailed records shall be maintained at the discretion of the
Finance Director for all items below the capitalization thresholds that should be
safeguarded from loss. These items will be part of the annual physical Inventory
discussed below. These Items include firearms, radios and computer equipment
that fall below the established thresholds and any other assets specifed by the
Finance Director.
Depreciation and Useful Life: The Finance Director will assign an estimated
useful life to all assets for the purposes of recording deprecia0on. The following
"Suggested Useful Lives" schedule will be used to establish lives for most assets.
Asset lives will be adjusted as necessary depending on the present condition and
use of the asset and based on how long the asset is expected to meet current
service demands. Adjustments should be properly documented. Depreciation
will be recorded based on the straight-linemethod using the half-year
convention and depreciated down to the assets salvage value.
Suggested Useful Lives:
Buildings 25-50 Years
Equipment 5-20 Years
Sewer Lines 40 - 90 Years
Infrastructure 10-50 Years
Safeguarding and Controlling Fired Assets: All capitalized machinery and
equipment, vehicles and furniture will be assigned a unique identifying number.
As fixed assets are purchased or disposed of, the Department Head In custody of
that asset will be responsible for preparing a fixed asset data sheet, which will
then be forwarded ro the Finance Department to ensure proper recording. A
physical inventory will be taken annually on or about June 30 and compared to
the physical inventory records. The results will be forwarded to the Finance
Department where appropriate adjustments will be made to the fixed asset
records.