(A) (1) Land. This city will capitalize all land purchases, regardless of cost. Exceptions to land capitalization are land purchased outright as easements or rights-of-way for infrastructure. A department will record donated land at fair market value on the date of transfer plus any associated costs.
(2) Machinery and equipment. This city will capitalize items with an individual value equal to or greater than $750. Machinery combined with other machinery to form one unit with total value greater than $750 will be counted as one unit. Improvements or renovations to existing machinery and equipment will be capitalized only if the result of the change meets all of the following conditions:
(a) Total costs exceeds $750;
(b) The useful life is extended two or more years; and
(c) The total costs will be greater than the current book value and less than the fair market value.
(3) Buildings.
(a) A department will capitalize buildings at full cost. A department’s new building will be capitalized only if it meets the following conditions:
1. The total cost exceeds $5,000;
2. The useful life is extended to two or more years; and
3. The total costs will be greater than the current book value and less than the fair market value.
(b) A department will record donated buildings at fair market value on the date of transfer plus any associated costs.
(4) Improvements other than buildings.
(a) The definition of this group is improvement to land for better enjoyment, attached or not easily removed, and will have a life expectancy of greater than two years. Examples are walks, parking areas, drives and other similar items. Improvements do not include roads, streets, or assets that are of value only to the public. For example, Main Street is a public street with greatest value to the public. Roads or drives upon city-owned land that provide support to the facilities are assets. A sidewalk down the road for public enjoyment is an infrastructure improvement and is not capitalized. However, sidewalks installed upon city-owned land for use by the public and for the support of the facility are capital assets. The city will capitalize new improvements other than buildings only if it meets the following conditions:
1. The total cost exceeds $5,000; and
2. The useful life is greater than two years.
(b) A department will capitalize improvements or renovations to existing improvements other than buildings only if the result meets the following conditions:
1. The total cost exceeds $5,000;
2. The useful life is extended two or more years; and
3. The total costs will be greater than the current book value and less than the fair market value.
(B) The city and its various departments shall classify capital expenditures as capital outlays within the fund from which the expenditure was made in accordance with the Chart of Accounts of the Cities and Towns Accounting Manual. The cost of property, plant and equipment includes all expenditures necessary to put the asset into position and ready for use. For purposes of recording fixed assets of the city and its departments, the valuation of assets shall be based on historical cost or where the historical cost is indeterminable, by estimation for those assets in existence. The city’s municipally owned utilities shall record a acquisition of fixed assets in accordance with the generally accepted accounting principals. 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 intended use. An asset register shall be maintained to provide a detailed record of the capital assets of the governmental unit.
(Ord. 02-04, passed 7-8-2002)