As used in this subchapter.
CAPITAL ASSETS. Assets that are used in operations and have an initial useful life in excess of one year. The term includes both tangible assets (examples: land, construction in progress, buildings, building improvements, vehicles, machinery, equipment, works of art, historical treasures, infrastructure) and intangible assets (examples: easements, software, water rights). Assets acquired for the purpose of sale or investment do not qualify as capital assets, regardless of their form, because they are not used in operations.
CAPITALIZATION. Capitalization of an asset occurs when the cost of the asset meets the "threshold", and the estimated useful life is in excess of one year.
DEPRECIATION. The process of allocating the cost of property over a period of time, rather than recognizing the cost as an expense in the year of acquisition. Generally, at the end of an asset's life, the sum of the amounts charged for depreciation in each accounting period (accumulated depreciation) will equal the original cost, less salvage value.
DONATED CAPITAL ASSET. Donated assets are those assets contributed to the Town of Trafalgar at no cost. Donated assets are treated like capital assets (using the Fair Market Value at the time of the donation).
ESTIMATED USEFUL LIFE. The estimated number of months or years that an asset will be able to be used for the purpose for which it was purchased. In determining useful life, consideration is given to the asset's present condition, use of the asset, construction type, maintenance policy, and how long it is expected to meet service demands.
FAIR MARKET VALUE. The price an asset would sell for on the open market, which is the price of an asset under the following usual set of conditions: prospective buyers and sellers are reasonably knowledgeable about the asset, behaving in their own best interest, free of undue pressure to trade, and given a reasonable time period for completing the transaction.
HISTORICAL COST. Historical cost of a capital asset is the cost or estimated cost at the time of acquisition, purchase, transportation, installation and site preparation charges, and the cost of any subsequent additions or improvements, excluding repairs.
INFRASTRUCTURE ASSETS. Long-lived capital assets that can normally be preserved for a significantly greater number of years than most capital assets (non-infrastructure assets). Infrastructure assets are normally stationary in nature.
LAND. Defined as specified land, lots, parcels or acreage including rights of way owned by the Town of Trafalgar, its various departments, boards or commissions, regardless of the method or date of acquisition.
SALVAGE VALUE. The salvage value of an asset is the value it is expected to have when it is no longer useful for its intended purpose. In other words, the salvage value is the estimated Fair Market Value for which the asset could be sold at the end of its useful life.
STRAIGHT LINE DEPRECIATION. Calculated by dividing the difference between an asset's cost and its expected salvage value by the number of years in its useful life.
THRESHOLD. The dollar amount ($5,000 under this policy, as specified below) that an asset must equal or exceed if that asset is to be capitalized. Otherwise, the item would be considered as an expense at the time of acquisition and would not be capitalized.
(Res. 2022-002, passed 1-20-2022)