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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 by Council Order 92-285 is hereby repealed in ft entirety and replaced widn the attached polky.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 'i1 28. 2003 w Bede nd :onded for 9 03-169 0 xnea (TITLE,)A tln FoliceF for CeFltalfaatfoo of Fireee¢ete iIBBiJ11M IO C0YtIC101 I/I I 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.