(A) The town and its various departments shall classify capital expenditures as capital outlays within the fund from which the expenditures was made in accordance with the Chart of Accounts of the Cities and Towns Accounting Manual. The cost of property, plants and equipment includes all expenditures necessary to put the asset into position and ready for use. For purposes of recording fixed assets of the town and its departments, the valuation of assets shall be based on historical costs, or where the historical cost is indeterminable, by estimation for those assets in existence.
(B) The town’s municipally-owned utilities shall record acquisitions of fixed assets in accordance with generally accepted accounting principles. When an asset is purchased for cash, the acquisition is simply recorded at the amount of cash paid, including all outlays relating to its purchase and preparation for use. Assets may be acquired under a number of other arrangements including, but not necessarily limited to, the following:
(1) Regular purchases;
(2) Acquisition under capital lease (see below);
(3) Assets acquired for a lump-sum purchase;
(4) Purchase on deferred payment contract;
(5) Acquisition by resolution/ condemnation;
(6) Acquisition by exchange of non-monetary assets;
(7) Acquisition by issuance of securities;
(8) Acquisition by self-construction;
(9) Acquisition by donation, contribution or discovery;
(10) Acquisition by outside contractor;
(11) Addition to an existing asset;
(12) Acquisitions by transfer from another department; and
(13) Acquisitions by annexation.
(C) Leased equipment should be capitalized if the lease meets any one of the following criteria:
(1) The lease transfers ownership of the property to the lessee by the end of the lease term;
(2) The lease contains a bargain purchase option;
(3) The lease term is equal to 75% of the estimated economic life of the leased property; or
(4) The present value of the minimum lease payments at the inception of the lease, excluding executory costs, equals at least 90% of the fair market value of the leased property.
(D) Leases that do not meet any of the above criteria should be recorded as an operating lease and reported in the notes of the financial statements.
(E) Some of these arrangements present special problems relating to the cost to be recorded. For example, in utility accounting, interest during a period of construction has been long recognized as part of the asset cost. Reference to an Intermediate Accounting Manual will illustrate the recording of acquisition of assets under the aforementioned acquisition arrangements. For purposes of recording fixed assets of the utilities, the valuation of assets shall be based on historical cost.
(2014 Code, § A3.4(3))