HomeMy WebLinkAbout04 ASSET CAPITALIZATION THRESHOLDAgenda Item 4
Reviewed:
AGENDA REPORT City Manager
Finance Director
MEETING DATE: MAY 21, 2013
TO: JEFFREY C. PARKER, CITY MANAGER
FROM: PAMELA ARENDS -KING, FINANCE DIRECTOR
SUBJECT: ASSET CAPITALIZATION THRESHOLD
SUMMARY:
The asset capitalization threshold currently in use was adopted by Council in 2003.
Accordingly, capital asset purchases (other than infrastructure) in excess of $5,000 are
capitalized and infrastructure assets with a cost exceeding $100,000 are capitalized.
We are recommending an increase in the threshold for capitalization of fixed assets to
$10,000 with a useful life of 5 years or more, and $150,000 for infrastructure assets.
RECOMMENDATION:
1. Adopt the recommended capitalization threshold for the City's fixed assets at
$10,000 with a useful life of 5 years or more.
2. Adopt the recommended capitalization threshold for capital and infrastructure
assets at $150,000.
FISCAL IMPACT:
None.
BACKGROUND:
The Governmental Accounting Standards Board (GASB) allows agencies to determine
what threshold to use for capitalization based on dollar amount and useful life. The
asset capitalization threshold currently in use was adopted by Council in 2003.
Accordingly, capital asset purchases (other than infrastructure) in excess of $5,000 are
capitalized and infrastructure assets with a cost exceeding $100,000 are capitalized.
Fixed assets (capital assets other than infrastructure) are items such as computers,
expensive tools, servers, and vehicles. Infrastructure assets are "long - lived" capital
assets that are stationary in nature and normally can be preserved for a significantly
ASSET CAPITALIZATION THRESHOLD
May 21, 2013 page 2 of 2
greater number of years than most capital assets. Examples of infrastructure assets
include roads, bridges, drainage, water systems, and lighting systems. Over the years,
the cost of these types of items has become more expensive, and the City has probably
capitalized some items that we don't have around for very long. These smaller
purchases should be treated more like a "supply" type of expenditure rather than "fixed
asset or infrastructure" that we might have around for several years. Increasing the
dollar and useful life thresholds will improve flexibility and reduce the staff time spent
tracking smaller purchases that do not really constitute capital items. The proposed
capitalization policy was discussed with the City's Audit Commission and the
Commission did not have any objections to these changes.
We are recommending an increase in the threshold for capitalization of fixed assets to
$10,000 with a useful life of 5 years or more, and $150,000 for infrastructure assets.
Pamela Arends -King O
Finance Director