(A) To be considered a capital asset for financial reporting purposes an item must at the time of acquisition be valued for accounting and financial reporting purpose at a unit value greater than or equal to $25,000 ($5,000 if funded through a federal grant). All land and vehicles are to be included and capitalized regardless of acquisition value.
(B) This increased capitalization threshold is to be applied prospectively starting January 1, 2021.
(C) Assets shall remain as part of the property record until they are retired, sold, traded, or otherwise disposed of regardless of their net book value amount.
(D) In some instances, depending on asset classification, a higher threshold is appropriate as indicated below due to the high cost of ongoing repairs and maintenance. These are minimum amounts following consideration of the ‘capitalizable’ nature of any expenditure as to asset improvement (capital) versus asset repair and maintenance (expense).
(E) The capitalization threshold for the following classes of assets shall be:
(1) Land: capitalize all;
(2) Improvements to land: $25,000;
(3) Buildings and building improvements: $100,000;
(4) Furnishings and equipment: $25,000;
(5) Vehicles: capitalize all;
(6) Federal grant furnishings and equipment: $5,000;
(7) Computer software: $25,000;
(8) General infrastructure: $100,000; and
(9) Construction in progress: report all.
(F) The concept of capitalizable is applied to an expenditure that is at or above the established capitalization threshold of $25,000 or the higher amount indicated of $100,000 for buildings and building improvements and general infrastructure. This is meant to determine capitalization or expense in the current period. To be a long-term governmental asset the determination follows consideration of:
(1) Increased capacity;
(2) Increased efficiency; and
(3) An extension of estimated useful life beyond the original estimate.
(G) A new asset with an acquisition value over the capitalization threshold and an estimated useful life beyond one year
(H) Changes in capitalization threshold are applied prospectively and some items below any new threshold will remain until fully depreciated and removed when they are retired from service.
(I) These capitalization amounts are based on asset acquisition value and are guidelines only with reference to the concepts of capitalizable and capitalization. Many repairs and maintenance are significant expenditures that do not result in increased capacity, efficiency, or extension of estimated useful life beyond the original expectation. These repairs and maintenance are to be expensed in the current year as such. See the definitions and examples in §§ 38.025 and 38.026.
(J) All land, including rights-of-way, shall be capitalized at the time of acquisition. If donated, it shall be recorded at the estimated fair value to acquire similar property. All vehicles regardless of historical cost or acquisition value will be capitalized.
(K) On major acquisitions and improvements of existing property, capitalization shall take place following formal acceptance, use, and utility in providing service as mentioned.
(Ord. 21-0055, passed 8-11-2021; Ord. 22-0027, passed 5-11-2022)