(A) Definitions. As used in this section:
CAPITAL ASSETS.
(a) Land and/or land improvements, including monuments, buildings, building improvements, construction in progress, machinery and equipment, vehicles, and infrastructure. All land will not be depreciated. All items with a useful life of more than one year, and having a unit cost of $5,000 or more shall be depreciated (including acquisitions by lease-purchase agreements or donated items). A capital asset meeting the criteria will be reported and depreciated in the government-wide financial statements.
(b) Assets that are not capitalized (items having a unit cost of less than $5,000) are expensed in the year of acquisition. An inventory will be kept on all computers and other equipment with a cost of less than $5,000. Exceptions are:
1. Items costing less than the above-described limits which are permanently installed as part of the cost of original construction on installation of a larger building or equipment unit will be included in the cost of the larger unit;
2. Modular equipment added subsequent to original equipment construction of a larger building or equipment unit which may be put together to form larger units costing more than the prescribed limits will be charged to capital assets even though the cost of the individual items is less than such limits; and
3. Cabinets, shelving bookcases, and similar items added subsequent to original construction, which are custom-made for a specific place and adaptable elsewhere will be capitalized.
CAPITAL OUTLAYS. Expenditures which benefit both the current and future fiscal periods. This includes costs of acquiring land or structures, construction or improvement of buildings, structures or other fixed assets and equipment purchases having an appreciable and calculable period of usefulness. These expenditures resulting in the acquisition of or addition to the city's general fixed assets.
FIXED ASSETS. Tangible assets of a durable nature employed in the operating of activities of the City and that are relatively permanent and are needed for the production and sale of goods or services are termed property, plant, and equipment or FIXED ASSETS.
HISTORICAL COST. 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.
LAND. Specified land, lots, parcels, or acreage.
MACHINERY and EQUIPMENT. An apparatus, tool, or conglomeration of pieces to form a tool. The tool will stand alone and not become part of a basic structure of building. This category also includes any other asset or type of physical property not otherwise classified in this subchapter.
TANGIBLE ASSETS. Assets that can be observed by one or more of the physical senses. These assets may be seen and touched and, in some environments, heard and smelled.
(B) Specific capitalization provisions.
(1) Land.
(a) The city will maintain all land purchases at historical cost. Exceptions to land depreciation are land purchased outright, as easements, or right-of-way for infrastructure. Examples of infrastructure include roads and streets, street lighting systems, curbs, parking meters, street signs, viaducts, wharfs, and storm water collection.
(b) Original costs of land will include the full value given to the seller, including relocation, legal services incidental to the purchase (including title work and legal opinion), appraisal and negotiation fees, surveying and costs for preparing the land for its intended purpose (including contractors and/or city employees (salary and benefits)), such as demolishing buildings, excavating, clean up and/or inspection. Land is not depreciated under generally accepted accounting principles.
(2) Machinery and equipment.
(a) The city will depreciate 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.
(b) Improvement or renovations to existing machinery and equipment will be capitalized only if the result of the change meets all of the following conditions:
1. The total costs exceed $5,000;
2. The useful life is extended two or more years;
3. The total cost will be greater than the current book value and less than the fair market value.
(c) Salvage value of machinery or equipment will be determined on an asset-by-asset basis. Depreciation will be calculated at year-end.
(3) Buildings.
(a) The city will capitalize buildings at full cost with no subcategories for tracking the cost of attachments. Examples of attachments are roofs, heating, cooling, lighting or sprinkler systems, or any part of the basic building. The department will include the cost of items designed or purchased exclusively for the building.
(b) A new building will be capitalized only if it meets the following conditions:
1. The total cost exceeds $5,000; and
2. The useful life is greater than two years.
(c) Improvements to an existing building will be capitalized only if the result meets all of the following conditions:
1. The total cost exceeds $5,000;
2. The useful life is extended two years or more; and
3. The total cost will be greater than the current book value and less than the fair market value.
(d) Any land, building, improvements, or equipment that has been donated will be recorded at fair market value on the date of transfer.
(4) Improvements other than buildings. These assets are defined as improvements to land for better enjoyment, attached or not easily removed, and which will have a life expectancy of greater than two years. Examples are walkways, parking areas and drives, golf cart paths, fencing, retaining walls, pools, outside fountains, planters, underground sprinkler systems, water supply mains, collection sewers, wells, dams, intake pipes, manholes, fire hydrants, and other similar items. Improvements do not include roads, streets, or assets that are of value only to the public. Roads or drives upon city-owned land that provide support to city facilities are assets. A sidewalk down the road for public enjoyment is an infrastructure improvement. Sidewalks installed upon city-owned land for use by the public and for the support of city facilities are capital assets.
(5) Recording and accounting. The city 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 the 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, the valuation of assets shall be based on historical costs, or where the historical cost is indeterminable, by estimation for those assets in existence.
(6) Composite/ground network. A network of assets is composed of all assets that provide a particular type of service for government. A subsystem of a network of assets is composed of all assets that make a similar portion or segment of a network of assets.
(a) "Composite depreciation" refers to calculation of depreciation for a collection of similar assets. A single composite rate is applied annually to the acquisition cost of the collection as a whole. At year-end, an adjustment will be made to the total cost to account for any additions/disposals throughout the year. The accumulated depreciation associated with it will also be adjusted. A gain or loss will never be reported on the asset when using the composite method. A full year's depreciation will be taken when the asset is placed in service and no depreciation will be recorded in the year it is sold or disposed of. Dissimilar assets will be grouped by useful lives.
(b) To determine the appropriate depreciation rate for the composite rate, divide one by the number of years the assets are depreciated. For instance, a group of assets with a 25-year life will be depreciated at 4% each year (1/25).
(7) Useful Life Schedule.
(a) The "useful life" of an asset, as set by the Indiana State Board of Accounts ("SBOA"), shall be the "useful life" applied by the city. For assets with regard to which the SBOA has not set a useful life, the city shall assign its own. As the date of adoption of this section, and for purpose of illustration, the current useful lives for various fixed assets are as follows:
Asset Class | Useful Life | Source |
Asset Class | Useful Life | Source |
Land | ||
Land | NA | NA |
Land improvements | NA | NA |
Right-of-way | NA | NA |
Easement | NA | NA |
Buildings | ||
Permanent structures | 50 | SBOA |
Wood frame structures | 25 | Internal |
Foundation, frame, floor structure | 50 | SBOA |
Interior construction | 15 | SBOA |
HVAC systems/fire alarms | 20 | SBOA |
Floor covering | 15 | SBOA |
Carpet | 5 | SBOA |
Electrical | 20 | SBOA |
Plumbing | 20 | SBOA |
Elevators | 20 | SBOA |
Masonry interior/exterior construction | 10 | Internal |
Wood frame open structure (i.e. park shelter) | 30 | Internal |
Metal frame open structure | 50 | Internal |
Roof | 10 | SBOA |
Improvements Other Than Buildings | ||
Parking lots | 50 | SBOA |
Street lights/traffic lights/flag poles | 25 | SBOA |
Fencing | 20 | SBOA |
Swimming pools | 20 | SBOA |
Pedestrian bridges | 30 | SBOA |
Major bridges | 50 | SBOA |
Alleys | 50 | SBOA |
Outside irrigation systems | 25 | SBOA |
Fountains | 20 | SBOA |
Tennis/basketball courts | 20 | SBOA |
Tunnels | 50 | SBOA |
Roads | 50 | SBOA |
Signs | 10 | SBOA |
Infrastructure | ||
Sewers (including manholes and pipes) | 100 | SBOA |
Lift stations/gas stations | 50 | SBOA |
Treatment plants | 50 | SBOA |
Pumps | 20 | SBOA |
Storm drains | 50 | SBOA |
Storm infrastructure | 50 | Internal |
Machinery and Equipment | ||
Heavy mobile equipment | 12 | SBOA |
Fire apparatus | 12 | SBOA |
Fire equipment | 10 | Internal |
General equipment | 12 | SBOA |
Athletic/exercise equipment | 10 | SBOA |
Indoor recreation equipment | 10 | |
AV equipment | 7 | SBOA |
Computer hardware | 5 | SBOA |
Copiers | 5 | SBOA |
Communication equipment | 10 | SBOA |
Servers | 7 | IRS |
Furniture | 15 | SBOA |
Appliances/food service equipment | 10 | SBOA |
General shop equipment | 20 | SBOA |
General tools | 10 | SBOA |
Outdoor recreation equipment | 15 | SBOA |
Trailers | 12 | SBOA |
Mowers | 7 | Internal |
Storm sirens | 20 | Internal |
Vehicles (Licensed) | ||
Automobile | 6 | SBOA |
Golf cart | 6 | SBOA |
ATV | 6 | SBOA |
Truck | 6 | SBOA |
Van | 6 | SBOA |
SUV | 6 | SBOA |
(Ord. 1, 2022, passed 1-24-2022)