Capital Asset and Depreciation Policy
Town of Fremont
I. PURPOSE
Every capital asset has limited useful service life that spans more than one year. These are categorized as Land, Land Improvements, Buildings, Building Improvements, Construction In Progress, Fixed Equipment, Movable Equipment, and Vehicles. The Town will identify and record assets in its accounting records. It will determine depreciation based on the historical acquisition costs of the assets or the ‘fair value’ of donated assets and utilize a straight-line method of depreciation over the estimated useful life of the asset.
II. DEFINITIONS
Land: Expenditures for the purchase of land. This includes closing costs, appraisals, and purchase of rights-of-way and/or site preparation.
Land Improvements: Expenditures for acquiring improvements to land (not associated with building) intended to make the land ready for its purpose. These assets include, but are not limited to, landscaping, property drainage, driveways, parking lots, sidewalks, monuments, fences, area lighting of streets and parking lots, driveways, fences, retaining walls, and athletic tracks and fields. Asset cost could include costs of studies, architectural and consulting fees for new or renovated improvements.
Buildings: Expenditures for contracted construction of new buildings, additions to or acquiring of existing buildings. This also includes the cost of demolition. This should include the initial cost of major building equipment components.
Building Improvements: Expenditures for improvements to existing buildings. This includes major permanent structural alterations, roof or window/door replacements, interior or exterior renovations, fire protection systems installation or upgrade, electrical and plumbing upgrades, heating, ventilation and air conditioning systems (HVAC), elevators, power generation, and other service systems of buildings.
Machinery and Equipment: Expenditures for equipment usually composed of a complex combination of parts, excluding vehicles.
Vehicles: Expenditures for vehicles used to transport persons, objects or large quantities used in construction. Examples include police cruisers, pick-up trucks, ambulances, fire apparatus, dump trucks, backhoes, graders, etc., including the installation of any related equipment.
Furniture and Fixtures: Expenditures for initial, replacement of additional furnishings and fixtures used in business/office facilities, including purchases of carpeting, desks, chairs, bookcases, counters, etc.
Series – Infrastructure: Expenditures for construction of, or major renovation to infrastructure, including roadways and bridges. This also includes the cost of demolition. It does not include any buildings or equipment related to these systems.
Roadways: Expenditures for construction of, or major renovation to roadways including the cost of development roads once accepted by the Town as Class V roads. This includes shim and overlay expenditures, as well as maintenance items such as crack sealant if they are deemed to add useful life to the asset.
Bridges: Expenditures for construction of, or major renovation to bridges. This includes pedestrian as well as vehicular bridges.
Depreciation Expense: The apportioned cost of a fixed asset over its useful life.
III. POLICY
The following table depicts the balance sheet and expenditure object codes of capital asset items, the dollar level at which the items will be inventoried and capitalized and whether the item is depreciated.
Table 1.
Classification Inventory Capitalize Depreciate
Land All All No
Land Improvements $5,000 $10,000 Yes
Buildings All $10,000 Yes
Building Improvements $5,000 $10,000 Yes
Building Systems $5,000 $10,000 Yes
Construction in Progress $5,000 $10,000 Yes
Machinery & Equipment $5,000 $10,000 Yes
Vehicles $5,000 $10,000 Yes
Furniture and Fixtures $5,000 $10,000 Yes
Infrastructure $5,000 $10,000 Yes
In accordance with Federal Regulations, any capital asset acquired with federal funds shall be inventoried and capitalized at a $5,000 threshold.
Depreciation: The straight-line method of depreciation is used to calculate depreciation. The Town may take into consideration salvage value at the end of an asset’s useful life. Grouped assets will not be assigned a salvage value.
The policy for recording depreciation on capital assets is to take one half of a full year’s depreciation in the calendar year in which the asset is placed in service, regardless of when it was actually placed in service during the year.
The following table reflects the useful lives of the various categories of capital assets for municipal government.
Table 2.
Category Examples Years
Land None
Land Improvements
Ground Work Landscaping 20
Structural Fencing, Parking Lots, Retaining Walls 20
Cisterns, Drafting Pits
Other Area and Street Lighting 15
Buildings
Permanent 50
Temporary 20
Building Improvements 40
Building Systems
HVAC 20
Power Generation 15
Machinery and Equipment
Light Vehicles Police Cruisers, Trucks 6
(<= GVRW 16,000lbs.), Ambulance
Heavy Vehicles Trucks (> GVRW 16,001 lbs) 8
Construction Equipment
Excavator, Frontend Loader, Backhoe 15
Fire/Rescue Vehicles
Engine, Pumper 20
Furniture and Fixtures
Office Fixtures Counters, Cabinets, 20
Desks, Tables, Chairs
Carpeting 7
Roadways
Asphalt 20
Gravel 15
Bridges Vehicle, Pedestrian 50
Construction In Progress None
Establishing and Setting the Threshold Levels for Recording Capital Assets
Estimated Useful Life – The first criterion is useful life. An asset must have an estimated useful life greater than one reporting period to be considered for capitalization and depreciation. Assets that are consumed, used-up, habitually lost or worn-out in one year or less should not be capitalized.
Estimated useful life means 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, governmental entities should consider the asset’s present condition, use of the asset, construction type, maintenance policy, and how long it is expected to meet service demands.
Asset Cost – The second criterion for determining depreciable capital assets is cost. Governmental entities do not need to capitalize every asset with a useful life greater than one year.
Write Off of Capital Assets:
Assets will be written off the books, along with its accumulated depreciation, when the asset is no longer in use. Assets fully depreciated, but still in use, will remain on the books. Certain assets that are capitalized and depreciated as a group will be written off the year it becomes fully depreciated.
V. AMENDMENTS
This Policy shall be reviewed annually effective the date of acceptance by the Selectmen.
VI. EFFECTIVE DATE
This policy shall be effective upon a vote of the Board of Selectmen and shall replace any and all Capital Assets and Depreciation Policies previously enacted by the Town.
Effective: 29 March 2012 Adopted: Board of Selectmen
Brett A Hunter Greta St Germain Annmarie Scribner
Reviewed: 21 March 2013 Reviewed and Readopted: 02 May 2013 Board of Selectmen
Greta St Germain Brett A Hunter Leon F Holmes Sr
Reviewed and Readopted: 27 February 2014 Board of Selectmen
Brett A Hunter Leon F Holmes Sr Gene Cordes
Update: Ambulance reclassified as a Light Vehicle from Fire/Rescue Vehicle section in Table 2.
Reviewed and Readopted: 12 February 2015 Board of Selectmen
Brett A Hunter Leon F Holmes Sr Gene Cordes
Reviewed and Readopted: 22 February 2018 Board of Selectmen
Gene Cordes Neal Janvrin Roger Barham
Reviewed and Readopted: 25 February 2021 Board of Selectmen
Gene Cordes Neal Janvrin Roger Barham