(A) Definitions. For the purposes of this subchapter, the following definitions shall apply unless the context clearly indicates or requires a different meaning:
CAPITAL OUTLAYS. Expenditures which benefit both the current and future fiscal periods and shall include the costs of acquiring land or structures, construction or improvement of buildings, structures nor other fixed assets, and equipment purchases having an appreciable and calculable period of usefulness. These are expenditures that result in the acquisition of or addition to the government's general fixed assets.
FIXED ASSETS. Tangible assets of a durable nature employed in the operating activities of the town's departments and utilities that are relatively permanent and are needed for the delivery of town and/or utility services that are not held for sale in the ordinary course of business. These fixed assets shall be defined into classes according to the physical characteristics (e.g. land, buildings, machinery and equipment, furniture and fixtures, improvements other than buildings).
TANGIBLE ASSETS. Assets that can be observed by one or more of the physical senses as they may be seen and touched and, in some environments, heard and smelled.
(B) Land. The town will capitalize all land purchases regardless of cost.
(1) Exceptions to land capitalization are land purchased outright as easements or rights of way for infrastructure needs (i.e., roads and streets, street lighting, bridges sidewalks, trails, curbs, street signs and storm water collection). Easements required for water or sewer infrastructure may be capitalized.
(2) Original cost of land will include the full value given to the seller, in addition to those costs associated with securing and preparing the land for final use. These fees may include legal, appraisal, negotiation, title work and opinion, surveying, and costs required to prepare the land for its intended use.
(3) A department will record donated land at fair market value on the date of transfer plus any associated costs.
(4) Purchases made using federal or state funding will follow the source funding policies in addition to the above procedures.
(C) Machinery and equipment.
(1) The definition of machinery and equipment is an apparatus, tool, conglomeration of pieces to form a tool or purchased equipment. These items will stand alone and not become a part of a basic structure or building.
(2) The, town will capitalize items with an individual value equal to or greater than $5,000. Machinery combined with other machinery to form one unit with a total value greater than the above-mentioned limit will be one unit.
(3) Shipping charges, consultant fees, and any other cost directly associated with the purchase, delivery, or set up, will be capitalized.
(4) 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 exceed $1,000;
(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.
(5) A department will record donated machinery and equipment at fair market value on the date of transfer with any associated costs included.
(6) Purchases made using federal or state funding will follow the source funding policies in addition to the above procedures.
(D) Buildings.
(1) A department will capitalize buildings at full cost with no requirement for subcategories for tracking the cost of separate building systems like HVAC, sprinklers, plumbing, lighting, etc. If subcategories are beneficial for enterprise accounting this may be done. The department will include the cost of items designed or purchased exclusively for the building.
(2) A department's new building will be capitalized only if it meets the following two conditions:
(a) The total cost exceeds $5,000; and
(b) The useful life is greater than five years.
(3) A department improving or renovating an existing building will capitalize the cost only if the result meets all of the following conditions:
(a) The total cost exceeds $5,000;
(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.
(4) Capital building costs will include preparation of land for the building, architectural and engineering fees, bond issuance fees, interest cost (while under construction), accounting costs if material, and any other costs directly attributable to the construction of a building.
(5) A department will record donated buildings at fair market value on the date of transfer with any associated costs.
(6) Purchases made using federal or state funding will follow the source funding policies in addition to the above procedures.
(E) Improvements other than buildings.
(1) The definition of this category of fixed assets is improvements to land that results in better enjoyment of that land and also has a life expectancy greater than two years. The fixed asset in this class is also attached or not easily removed from the existing land. Examples are walks, parking areas and drives, golf cart paths, fencing, retaining walls, pools, outside fountains, planters, underground sprinkler systems, and other similar items.
(2) The town will capitalize new improvements other than buildings only if it meets the following two conditions:
(a) The total cost exceeds $5,000;
(b) The useful life is greater than two years.
(3) A department will capitalize improvements or renovations to existing improvements other than buildings only if the result meets all of the following conditions:
(a) The total cost exceeds $2,500;
(b) The asset's 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.
(4) A department's donated improvements other than buildings will be recorded at fair market value on the date of the transfer with any associated costs.
(5) Purchases made using federal or state funding will follow the source finding policies and above procedures.
(F) Historical costs. The cash equivalent price exchanged for goods or services at the date of acquisition. Land, buildings, equipment, and most inventories are common examples of items recognized under the historical cost attribute.
(G) Enterprise funds. Enterprise funds are those used to account for operations that are:
(1) Financed and operated in a manner similar to private business enterprise, where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or
(2) Where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability and other purposes.
(3) The enterprise funds of the Town of Lowell, Indiana, shall include the municipally owned water and wastewater utilities and the operation of these utilities shall require enterprise fund accounting and reporting.
(Ord. 2001-01, passed 1-22-01; Am. Ord. 2008-09, passed 5-12-08)