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(A) Generally. The Capital Assets Policy Manual outlines the accounting policies for identifying, tracking and controlling the county’s capital assets. Capital assets can be tangible such as land, infrastructure, building and improvements, furnishings, machinery, equipment, vehicles and computer hardware or intangible such as right-of- way easements and computer software. They have a useful life and are expected to last for more than one year.
(1) The county complies with various accounting and financial reporting standards including generally accepted accounting principles (GAAP); governmental accounting, auditing and financial reporting (GAAFR); and applicable state and federal reporting requirements. Further, the county complies with the Governmental Accounting Standards Board (GASB) Statement No. 34 of the Governmental Accounting Standards Board, Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments and Statement No. 51 Accounting and Finance Reporting for Intangible Assets.
(2) GASB No. 34 states that governments should provide additional disclosures in their summary of significant accounting policies including the policy for capitalizing assets and for estimating the useful lives of those assets which are used to calculate the depreciation expenses. The statement also requires disclosure of major classes of assets; delineation of assets associated with governmental activities from those associated with business-type activities; beginning and end-of-year balances; capital acquisition; sales/dispositions; and current- period depreciation expense by function.
(3) GASB No. 51 requires that all intangible assets, such as easements, water rights, timber rights, land use rights, mineral rights, patents, trademarks. copyrights and computer software is classified as capital assets. This statement also establishes guidance for the amortization of intangible assets and an approach to recognizing intangible assets that are internally generated.
(4) In the consolidated annual financial report (CAFR), the fund financial statements reflect capital acquisitions as capital outlay expenses; however, in the government-wide financial statements, they are reflected as capital assets.
(C) Definitions and valuation.
(a) Capital assets should be valued at their cost at the time they are placed in service; they are treated as an asset instead of being expensed. The asset is then depreciated/amortized over the estimated useful life of the asset. The value of the asset includes ancillary costs that are necessary to place the asset in its intended location and use. However, minor ancillary costs are not required to be capitalized (not measurable or readily available at the time a capital asset is recorded).
(b) When an asset is purchased, the historical cost, including all ancillary costs, is capitalized. If the historical cost is not practicably determinable, an estimated cost is used. When assets are donated or dedicated, the fair market value at the time of the donation is used. If the fair market value is not practieably determinable, due to the lack of sufficient records, an estimated cost is used. If the donated asset is land, the capitalized value should reflect its appraised or fair market value.
(2) Definitions. For the purposes of this section, the following definitions shall apply unless the context clearly indicates or requires a different meaning.
1. Right-of-way. Permanent right-of-way easement is an intangible asset considered to have an indefinite useful life and is not amortized.
2. Computer software, purchased or licensed. Software that is purchased or licensed from a third party is valued at the purchase licensed cost. If the contract breaks down the cost of training, data conversion, travel and the like, they are excluded from the capitalized value. Annual maintenance and licensing fees are also not capitalized. Licensed software that has a large initial year licensing fee that is followed by smaller annual fees is valued at the amount of the initial license fee amortized over the life of the initial contract.
3. Computer software, internally generated. Computer software should be considered internally generated if it developed in-house by the county, or by a third-party contracted in the county. Commercially available software that is purchased or licensed by the county and modified using more than minimal incremental effort before being put into operation should be considered internally generated. Only the application development stage is capitalized: the following are not capitalized: preliminary project stage, data conversion (in general), training and the post-implementation/ operating stage. For existing applications the software development is capitalized if it increases the functionality of the software, increases the efficiency of the software, and/or extends the useful life. If the modification does not result in the any of the above outcomes, then the modification should be considered maintenance, and the associated outlays should be expensed as incurred.
1. Land. The capitalized value of land includes the purchase price and any ancillary costs. Ancillary costs may include: legal and title fees; professional fees of engineers, attorneys, appraisers and financial advisors; surveying fees; appraisal and negotiation fees: damage payments; site preparation costs; and costs related to demolition of unwanted structures.
2. Infrastructure. Long-lived capital assets that are stationary in nature and normally can be preserved for a significantly greater number of years than most other capital assets. Examples include roads, bridges, signals, tunnel drainage systems, water and sewer systems, dams, lighting systems and overlaps. The capitalized value includes the cost of designing and building the infrastructure. Ancillary costs may include: professional fees of engineers, attorneys, appraisers and financial advisors; survey fees; appraisal and negotiation fees; damage payments; site preparation costs; and costs related to demolition of unwanted structures.
3. Building and improvements. The capitalized value includes both the acquisition and capital improvement costs. Capital improvement costs include structures (e.g., office buildings, storage quarters and other facilities) and all other property permanently attached to, or an integral part of, the structure (e.g., loading docks, heating and air-conditioning equipment and refrigeration equipment). The county has the option of capitalizing buildings by components when the useful lives of the components vary. Ancillary costs may include: professional fees of architects, engineers, attorneys, appraisers and financial advisors; damage payments; costs of fixtures permanently attached to a building or structure; insurance premiums and related costs incurred during construction; and any other costs necessary to place the building or structure into its intended location.
4. Furnishings, machinery, equipment, vehicles, computer hardware, and other capital assets. The cost for this asset type reflects the actual or estimated cost of the asset. Ancillary costs may include: transportation charges, sales tax, installation costs and any other normal or necessary costs required to place the asset in its intended location and condition for use. Modular furniture and replacement flooring are not capital assets.
(D) Capitalization threshold.
(1) The county has adopted the following capitalization thresholds:
For intangible internally generated computer software
For tangible assets and all other intangible assets
(2) Assets valued at or above $1,000 and below $5,000 are considered minor assets. Some minor assets warrant “control” due to their sensitive nature and may include weapons, radios, personal computers, laptop computers, printers and small power tools. These sensitive minor assets are tracked/inventoried at the county department level. Departments will maintain listings for each minor asset including the following data elements: tag number, location, asset description, model, serial number, general ledger code, cost, date of purchase, to whom the minor asset is assigned, the condition, and any other information that assists in controlling the asset or is deemed relevant.
(E) Depreciation/amortization and useful life.
(1) The county uses the straight-line method of depreciation with no allowance for salvage value. Other depreciation methods may be accepted depending on the nature of the asset.
(2) The estimated useful lives of county assets are:
Rural roads low volume
Rural roads high volume
Roads - urban
Building and improvements
Building and improvements
Heavy equipment vehicles*
Furniture and fixtures
Light equipment vehicles*
Equipment and computer hardware
Computer software purchased
Computer software licensed
Determined by contract
Computer software internally generated
* For assets placed in service on or after 12-1-2009
(F) Record keeping and identification.
(1) The Finance Department is responsible for maintaining and updating the county’s capital asset records to reflect additions, deletions, retirements and transfers in the capital asset module on an annual basis. On a regular basis, the Finance Department will compare the capital asset additions posted in the capital assets module with the capital outlay expenditures. Any discrepancies will be accounted for and necessary adjusting entries will be posted.
(2) County departments are responsible for notifying the Finance Department when assets are acquired, donated, transferred, surplused and/or otherwise removed from service. Forms are available on the intranet containing the required information. Any other relevant policies and procedures, such as the Surplus Policies and Procedures must also be followed.
(3) When suspected or known losses of assets occur, the Department should conduct a search for the missing property. The search should include checking transfers to other departments, storage, scrapping, conversion to another asset and the like. If the missing property is not found, the department should contact the Finance Department.
(4) The County Highway Department is responsible for maintaining records for infrastructure. The Highway Department ensures that all costs related to infrastructures are added together and all supporting information is available in the Department. The Highway Department reports any additions, deletions or changes in the county’s infrastructures to the Finance Department on a regular basis.
(5) When possible, assets should be marked with a property control number to aide in the identification and tracking of assets and to discourage theft. The Finance Department is responsible for maintaining and assigning property control numbers and ensuring that adequate controls for safeguarding unissued, mutilated and voided capital asset property tags are followed. Property control numbers should be permanently affixed to the asset by using the property tag provided by the Finance Department. The property tag number should be located on the principal body of the asset, rather than a removable part.
(6) It is impractical or impossible to mark some of the county’s capital assets according to these standards. For example, where the capital asset:
(a) Is stationary in nature and not susceptible to theft (such as land, infrastructure, buildings, improvements other than buildings and leasehold improvements);
(b) Has a unique permanent serial number that can be used for identification, security and inventory control;
(c) Would have its warranty negatively impacted by being permanently marked; or
(d) Would lose significant historical or resale value (such as art collections or museum and historical collections).
(7) The Sheriff’s Department uses their own numbering system for marking and tracking their vehicles.
(G) Capital leases.
(1) A capital lease is a lease that transfers substantially all the benefits and risks inherent in the ownership of the property to the county. Capital leases are valued at the net present value of the future minimum lease payments or the fair market value. To be a capital lease, the value must be a minimum of $5,000 and meet one or more of the following four criteria to qualify as a capital lease:
(a) Ownership of the leased property is transferred to the county by the end of the lease term;
(b) The lease contains a bargain purchase option;
(c) The term is equal to 75% or more of the estimated useful life of the leased property; or
(d) If, at the inception of the lease, the present value of the future minimum lease payments, excluding executory costs (usually insurance, maintenance, and taxes paid in connection with the leased property, including any profit thereof) is 90% or more of the fair market value of the leased property.
(2) Capital leases are to be used only to acquire capital assets. It is a liability for a future stream of payments. If the lease involves the acquisition of more than one asset, each asset is capitalized if its fair market value is $5,000 or more.
(Res. 11-130, passed 4-21-2011)