For the purpose of this division, the following definitions
and provisions for implementation shall apply unless the context clearly
indicates or requires a different meaning.
Assets that can be observed by one or more of the physical
senses. They may be seen and touched and, in some environments, heard
and smelled.
Tangible assets of a durable nature employed in the operating
activities of the unit and that are relatively permanent and are needed
for the production or sale of goods or services are termed property,
plant and equipment or fixed assets. These assets are not held for
sale in the ordinary course of business. This broad group is usually
separated into classes according to the physical characteristics of
the items (e.g. land, buildings, improvements other than buildings,
machinery and equipment, furniture and fixtures).
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 are expenditures resulting in the acquisition of
or addition to the government’s general fixed assets.
This city will capitalize all land purchases, regardless of
cost.
Exceptions to land capitalization are land purchased outright,
as easements, or rights-of-way for infrastructure. Examples of infrastructures
are roads and streets, street lighting systems, bridges, overpasses,
sidewalks, curbs, parking meters, street signs, viaducts, wharves,
and stormwater collection.
Original cost of land will include the full value given to the
seller, including relocation, legal services incidental to the purchase
(including title work and opinion), appraisal and negotiation fees,
surveying and costs for preparing the land for its intended purpose
(including contractors and/or city workers [salary and benefits]),
such as demolishing buildings, excavating, clean up, and/or inspection.
Donated land will be recorded at fair market value on the date
of transfer plus any associated costs.
Purchases made using federal or state funding will follow the
source funding policies and above procedures.
The definition of machinery and equipment is: an apparatus,
tool, or conglomeration of pieces to form a tool. The tool will stand
alone and not become a part of a basic structure or building.
The city will capitalize and tag items with an individual value
equal to or greater than $5,000.00. Machinery combined with other
machinery to form one unit with a total value greater than the above-mentioned
limit will be one unit.
Shipping charges, consultant fees, and any other cost directly
associated with the purchase, delivery, or set up, (including contractors
and/or city works [salary and benefits]), which makes such equipment
operable for its intended purpose will be capitalized.
Improvements or renovations to existing machinery and equipment
will be capitalized only if the result of the change meets all of
the following conditions:
Examples include:
A work truck being equipped with screens, lights, or radios
for use as single unit throughout its life expectancy is considered
one unit.
If the police car is constantly changing light bars, cameras,
or radios, the city will capitalize each piece of equipment separately,
if it meets the required dollar amount.
A computer (CPU, monitor, keyboard, and printer) is considered
one unit.
Donated machinery and equipment will be recorded at fair market
value on the date of transfer with any associated costs.
Purchases made using federal or state funding will follow the
source funding policies and above procedures.
Buildings will be capitalized at full cost with no subcategories
for tracking the cost of attachments. Examples of attachments are
roofs, heating, cooling, plumbing, lighting, or sprinkler systems,
or any part of the basic building. Also included will be the cost
of items designed or purchased exclusively for the building.
Improving or renovating an existing building will capitalize
the cost only if the result meets all of the following conditions:
Capital building costs will include preparation of land for
the building, architectural and engineering fees, accounting costs
if material, and any costs directly attributable to the construction
of a building.
Donated buildings will be recorded at fair market value on the
date of transfer with any associated costs.
Purchases made using federal or state funding will follow the
source funding policies and above procedures.
The definition of this group is improvements to land for better
enjoyment, attached or not easily removed, and will have a life expectancy
of greater than two years.
Examples are walks, parking areas and drives, golf cart paths,
fencing, retaining walls, pools, outside fountains, planter underground
sprinkler systems, and other similar items.
Improvements include roads, streets, or assets that are of value
to the public. For example, water lines, sewer lines, water storage
tanks, wastewater treatment facilities, street signs, sidewalks, parks,
municipal swimming pool, and sports facilities.
The city will capitalize improvements or renovations to existing
improvements other than buildings only if the result meets the following
conditions:
Donated improvements other than buildings will be recorded at
fair market value on the date of transfer with any associated costs.
Purchases made using federal or state funding will follow the
source funding policies and above procedures.
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.
Those funds used to account for operation:
That are 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
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.
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The enterprise funds of the city shall include the municipally
owned sewage utility. Operation of this utility shall require enterprise
fund accounting and reporting.
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(Ordinance 20-11-09, sec. 1, adopted 11/9/20; Ordinance 20-11-09-a adopted 12/13/21)
(a)
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 city. The cost of 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 cost or where
the historical cost is indeterminable, by estimation for those assets
in existence.
(b)
The
city’s municipally owned utility shall record acquisition of
fixed assets in accordance with generally accepted accounting principles.
When an asset is purchased for cash, the acquisition is simply recorded
at the amount of cash paid, including all outlays relating to its
purchase and preparation for intended use. Assets may be acquired
under a number of other arrangements including:
(1)
Assets acquired for a lump-sum purchase price.
(2)
Purchase on deferred payment contract.
(3)
Acquisition under capital lease.
(4)
Acquisition by exchange of non-monetary assets.
(5)
Acquisition by issuance of securities.
(6)
Acquisition by self-construction.
(7)
Acquisition by donation or discovery.
(c)
Some
of these arrangements present special problems relating to the cost
to be recorded, for example, in utility accounting, interest during
a period of construction has long been recognized as a part of the
asset cost. Reference to an intermediate accounting manual will illustrate
the recording of acquisition of assets under the aforementioned acquisition
arrangements. For purposes of recording fixed assets of the utility
the valuation of assets shall be based on historical cost.
(d)
In
addition, an asset register shall be maintained to provide a detail
record of the capital assets of the enterprise or governmental unit.
(Ordinance 20-11-09, sec. 2, adopted 11/9/20)
Be it ordained that accounting controls be designed and implemented
to provide reasonable assurances that:
(1)
Capital
expenditures made by the city and utility be in accordance with management’s
authorization as documented in the minutes.
(2)
Transactions
of the utility be recorded as necessary to permit preparation of financial
statements in conformity with generally accepted principles.
(3)
Adequate
detail records be maintained to assure accountability for city and
utility owned assets.
(4)
Access
to assets be permitted in accordance with management’s authorization.
(5)
The
recorded accountability for assets be compared with the existing assets
at least every two years and appropriate action be taken with respect
to any differences.
(Ordinance 20-11-09, sec. 3, adopted 11/9/20)
