HomeMy WebLinkAboutPOL-002-22 Tangible Capital Assets
COUNTY OF NEWELL - POLICY HANDBOOK
POLICY NO: POL-002-22
TITLE: TANGIBLE CAPITAL ASSETS
ADOPTED: October 6, 2022 (C-290/22)
SUPERCEDES NO: 2014-PAD-055 PAGE NO: 1 of 8
POLICY PURPOSE:
This policy is to provide direction on recognizing recording, valuing, and reporting on Tangible
Capital Assets on a consistent basis in accordance with Public Sector Accounting Standards
Section 3150 – Tangible Capital Assets.
POLICY GUIDELINES:
All tangible property owned by the County of Newell, either through construction, purchase, or
donation, and which qualify as capital assets are addressed in this policy.
Definition
Tangible Capital Assets are non-financial assets having physical substance that:
are held for use in the production or supply of goods and services, for rental to others, for
administrative purposes or for the development, construction, maintenance, or repair of
other tangible capital assets;
have useful economic lives extending beyond an accounting period;
are to be used on a continuing basis; and
are not intended for sale in the ordinary course of operations.
Capitalization Thresholds
Thresholds are determined for each major asset categorization and determine whether
expenditures are to be capitalized as assets and depreciated or treated as current year expense.
Expenditures that meet both the criteria of a tangible capital asset and exceed the capitalization
thresholds set out in (Schedule 1) are to be recorded as a capital asset.
Non-Capitalized Assets
Assets that do not meet the capitalization criteria are classified under Asset Management and
expensed. These assets should be tracked, controlled, maintained, and managed according to
the County asset management strategy.
Betterments
Betterments are enhancements to the service potential of a tangible capital asset. To be
considered a betterment there must be an increase in the previously assessed physical output or
service capacity;
A reduction in associated operating costs;
An extension of the estimated useful life; or
An improvement in the quality of output
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Betterments which meet the thresholds set out in (Schedule 1) are capitalized. Otherwise, they
are expensed.
Where a betterment enhances the service potential of a capital asset without increasing its
estimated useful life, the deprecation period should remain the same.
Where a betterment increases the estimated useful life of a capital asset, its useful life should be
changed.
Where a betterment involves the replacement of an identifiable component of a capital asset, the
original cost of that component and the related accumulated depreciation should be removed from
the accounting records.
Valuation of Capital Assets
Tangible capital assets should be recorded at cost plus all ancillary charges necessary to get the
asset into service. The cost is the gross amount paid to acquire, construct, develop or better a
tangible capital asset.
Donated or Contributed Assets
A tangible capital asset may be gifted or contributed by an external third party with no cash outlay.
Where an asset is acquired through a third-party contribution, the amount to record the asset is
at the cost provided by the contributor. If the cost cannot be provided, a fair value may be
estimated using either market or appraised values or cost may be determined by an estimate of
replacement cost.
Work/Construction in Progress
Work in progress is the construction or development of a capital asset that extends over time.
Work in progress is not capitalized or amortized until the asset is in service. The capital costs for
such an asset should be accumulated until the asset is ready. Amortization is calculated and
begins the first month that the asset is in service.
The County of Newell will not capitalize interest costs on tangible capital assets.
Componentization
Tangible capital assets may be accounted for using either the single asset or component
approach. Whether the component approach is to be used will be determined by the usefulness
of the information versus the cost of collecting and maintaining information at the component
level.
Group/Pooled Assets
Tangible capital assets that have a unit value below the capitalization threshold (on their own) but
have a material value as a group, may be pooled together as a single asset with one combined
value. Although recorded in the asset module as a single asset, each unit of the pool may be
recorded in an asset sub-ledger for monitoring and control of their use and maintenance.
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Amortization
The acquisition cost (historical cost) less the residual value will be amortized over its estimated
useful life, on a straight-line basis.
Capital asset categories and expected useful life are outlined in (Schedule 2). The expected
useful life schedule is to be used as a guideline on useful life for tangible capital assets.
Residual value
Residual, or salvage, value is the net amount that is realized at the end of the useful life of an
asset. The residual value is established based on a percentage, according to prices in effect at
the time the asset is purchased.
Write Down
When the value of a tangible capital asset declines due to a permanent impairment, a write-down
to the value is to be recorded.
A permanent impairment in value occurs when an asset no longer contributes to the provision of
goods and services, when the asset is no longer going to be used in its current capacity and there
is no other alternative use for the asset, or when the value of the future economic benefits are
less than the asset’s net book value.
There must be persuasive evidence that the change in condition is permanent for a write-down to
take place. The ability to objectively estimate the amount of the reduction in value must exist. A
write-down is not to be reversed.
Capital Leases
Leases which transfer substantially all the benefits and risks incidental to ownership of property
are accounted for as leased tangible capital assets. All other leases are accounted for as
operating leases and the related payments are charged to expenses as incurred.
Under the terms and conditions of the lease, substantially all the benefits and risks incident to
ownership are, in substance, transferred to the County without necessarily transferring legal
ownership. A capital lease must be capitalized in the same manner as all other tangible capital
assets and follow this policy.
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Schedule 1 – Capitalization & Betterment Thresholds
Capitalization Thresholds:
Category Capitalization Threshold
Engineering Structures $50,000
Buildings $50,000
Machinery & Equipment $5,000
Land N/A (all land reported)
Land Improvements $10,000
Vehicles $5,000
Cultural & Historical N/A
Work-In-Progress N/A
Betterment Thresholds:
Category Betterment Threshold
Engineering Structures $25,000
Buildings $25,000
Machinery & Equipment $5,000
Land N/A (all land reported)
Land Improvements $5,000
Vehicles $5,000
Cultural & Historical N/A
Work-In-Progress N/A
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Schedule 2 – Asset Categories and Expected Useful Life
Major
Minor
Expected
Sub-Class One
Useful Life
Sub-Class Two
Sub-Class Three
Land
Right -of-Way N/A
Undeveloped Right -of-Way N/A
Parks N/A
General N/A
Cultural & Historical
Public Art N/A
Historical Art N/A
Heritage Site N/A
Land Improvements
Parking Lot
Gravel 30
Asphalt 30
Playground Structures 20
Landscaping 25
Fences 20
Sprinkler Systems 25
Golf Courses 45
Tennis Courts 20
Lakes/Ponds 25
Retaining Walls 20
Running Tracks 15
Outdoor Lighting 20
Soccer Pitch – Outdoor 20
Bike/Jogging Paths
Gravel 15
Asphalt 20
Airport Runways 10
Buildings
Permanent Structures
Wood 60
Metal 70
Concrete 70
Portable Structures
Metal 25
Wood 25
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Major
Minor
Expected
Sub-Class One
Useful Life
Sub-Class Two
Sub-Class Three
Engineering Structures
Roadway System
Bridges
Major 100
Standard 50
Bridge Sized Culvert 45
Roads & Streets
Lanes/Alleys
Paved 20
Gravel 30
Nonconforming 20
Roads
Paved 30
Gravel 30
Curb, Gutter & Sidewalks 30
Urban-Arterial, Collector and Local 30
Road Signs
Traffic Control 30
Information 30
Lights
Decorative 30
Street 30
Traffic 30
Water System
Distribution System (Pipes) 75
Air release, Valves, Hydrants, Vaults, and Flush 30
Points
Booster Stations, Distribution Stations, and Water 30
Sample Stations
Wastewater System
Collection Systems (Pipes) 75
Lagoons 45
Storm System
Collection Systems (Pipes) 75
Pump, Lift, Transfer Stations, Valves, Catch 30
Basins, and Manholes
Ponds 45
Fiber Optics 30
Electrical System 30
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Major
Minor
Expected
Sub-Class One
Useful Life
Sub-Class Two
Sub-Class Three
Machinery and Equipment
Attachments 20
Bins 15
Chipper 10
Communications
Video Conferencing 10
Telephone Systems 5
Information Technology Systems
Hardware 5
Software 10
Operating Systems 5
Digital Assets
Orthophotos/Imagery 3
Data 5
Farm Implements 10
Drills 5
Graders 10
Heavy Construction Equipment 15
Office Furniture & Equipment
Furniture 20
Office Equipment 10
Audiovisual 5
Photocopiers 5
Plows 12
Sander/Hopper 10
Police Special Equipment 10
Sprayer 8
Tools, Shop and Garage Equipment 25
Tractor 8
Trailers 15
Turf Equipment 5
Tanks 20
Snow Blower 7
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Major
Minor
Expected
Sub-Class One
Useful Life
Sub-Class Two
Sub-Class Three
Vehicles
½ Ton 8
¾ Ton 8
1 Ton 8
2 Ton 8
3 Ton 8
4 Ton 15
Sport Utility 8
All Terrain 5
Gravel Truck 10
Semi -Tractor 10
Transit Bus 8
Fire Apparatus 20
Water Truck 14