(A) Capitalization threshold.
(1) To be considered a capital asset for financial reporting records, an item must be at or above the capitalization threshold having a historical cost of $5,000 or more, or for a donated capital asset, a Fair Market Value of $5,000 or more at the time of donation. Capital assets will remain part of the property records until they are retired, sold, traded, destroyed, or otherwise disposed of, regardless of net book value amount.
(2) Land is to be considered a capital asset under this policy regardless of its historical cost or Fair Market Value; but land is not subject to depreciation.
(3) Assets acquired with debt proceeds may be capitalized regardless of historical cost.
(4) Improvements to buildings and general infrastructure, in order to be considered a capital asset, must be significant, and increase capacity (i.e. adding square footage to an existing building, or adding new lanes to an existing road), increase efficiency (i.e. same size, but service provided at less cost), or extend the asset's estimated useful life beyond the original expectation, in addition to meeting the threshold. Otherwise, costs, including those that preserve the useful life of an improvement or infrastructure, are expensed.
(5) Individual items with a historical cost less than $5,000 (or a fair market value of less than $5,000 at the time of donation for a donated capital asset), but that operate as a part of a network system may be capitalized in the aggregate, by grouping the assets, if the estimated average useful life of the individual items is at least one year. A network is defined as a cohesive system that functions together for a common purpose, but that is comprised of separate and independent components or parts (i.e., computer systems, telephone systems, etc.). The overriding value to the Town of Trafalgar is the entire network, not the individual component or part.
(B) Valuation. In accordance with generally accepted accounting principles, the Town of Trafalgar will value its capital assets at historical costs (or fair market value in the case of donated capital assets). In determining the historical cost (or fair market value in the case of donated capital assets), due consideration will be made as to the cost or estimated cost at the time of acquisition, purchase, transportation, installation, site preparation, and subsequent additions and improvements.
(C) Capital assets inventory report.
(1) Annually, and by December 31 of each year, the heads of each department of the Town of Trafalgar shall provide to the Clerk-Treasurer a current inventory list of all Town of Trafalgar capital assets under their respective oversight or control.
(2) The Clerk-Treasurer is to ensure that reporting for capital assets is being exercised by establishing and maintaining a Master Capital Asset Inventory. As part of the financial auditing, the Clerk-Treasurer shall submit a capital asset report to the Town Council of the Town of Trafalgar on an annual basis, by March 31 of each year. This report shall include the following information:
(a) Type of asset (i.e. land, building, infrastructure);
(b) Date of acquisition;
(c) Acquisition cost;
(d) Estimated useful life;
(e) Annual depreciation; and
(f) Accumulated depreciation.
(D) Depreciation. The Town of Trafalgar will use straight-line depreciation to depreciate capital assets, but land is not subject to depreciation.
(E) Estimated useful life. The following ranges are general guidelines to be used to estimate the useful life of an asset for the purpose of depreciation:
(1) Buildings and other structures: 20-50 years;
(2) Vehicles: 4-15 years;
(3) Other equipment: 5-20 years; and
(4) Infrastructure: 20-75 years.
(F) Inventory. For internal control purposes, the Town of Trafalgar may maintain an inventory listing of certain assets that do not meet the threshold ("Controlled Equipment"). These items should be specifically accounted for and inventoried periodically due to its resale or salvage value and potential risk of theft. These items may include, but not be limited to, computers, construction equipment, and other office equipment. Each department, council, board, or commission of the town of Trafalgar is responsible for all controlled equipment within its control and area of responsibility.
(G) Capital assets purchased with grant funds. When federal grant funds are used to purchase capital assets, compliance with the applicable uniform administrative requirements, cost principles, and audit requirements for federal awards in the Code of Federal Regulations is required. Grants typically have requirements specified in the Grant Award Letter with which the Town of Trafalgar shall comply.
(H) Disposal and transfer of assets. Disposition of assets owned by the Town of Trafalgar shall be performed in accordance with applicable policies, procedures, and ordinances of the Town of Trafalgar and in accordance with the applicable sections of the Indiana Code.
(Res. 2022-002, passed 1-20-2022)