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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 POL-002-22 TANGIBLE CAPITAL ASSETS Page 2 of 8 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. POL-002-22 TANGIBLE CAPITAL ASSETS Page 3 of 8 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. POL-002-22 TANGIBLE CAPITAL ASSETS Page 4 of 8 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 2022-PAD-055 TANGIBLE CAPITAL ASSETS Page 5 of 8 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 2022-PAD-055 TANGIBLE CAPITAL ASSETS Page 6 of 8 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 2022-PAD-055 TANGIBLE CAPITAL ASSETS Page 7 of 8 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 2022-PAD-055 TANGIBLE CAPITAL ASSETS Page 8 of 8 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