Resolution 2012-09 RESOLUTION NO. 2012-
RESOLUTION APPROVING A REVISED
CAPITAL ASSET POLICY
WHEREAS, the City Council of the United City of Yorkville has considered and
discussed the importance of updating the United City of Yorkville Fixed Asset Policy, and
WHEREAS, the text of the United City of Yorkville Capital Asset Policy the City
Council now desires to adopt is set forth on the attached Exhibit "A" which is incorporated
herein, and
WHEREAS, it has been determined to be in the best interests of the United City of
Yorkville to repeal the previous Fixed Asset and Capitalization Policy, approved on June 10,
2003, and adopt a revised policy titled Capital Asset Policy in the form attached hereto in Exhibit
"A"
NOW THEREFORE BE IT RESOLVED, by the Mayor and City Council of the
United City of Yorkville, Kendall County, Illinois, that the Capital Asset Policy in the form set
forth on Exhibit "A" attached hereto and incorporated herein is hereby adopted as the Capital
Asset Policy of the City and the previous Fixed Asset and Capitalization Policy heretofor
adopted by the City Council is hereby repealed in its entirety.
Passed by the City Council of the United City of Yorkville, Kendall County, Illinois this
Aq —day of Aet'k' , A.D. 2012.
CITY CLERK
Resolution No. 2012- 0-1
Page 1
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CHRIS FUNKHOUSER � DIANE TEELING /
LARRY KOT JACKIE MILSCHEWSKI
CARLO COLOSIMO \ MARTY MUNNS
ROSE ANN SPEARS GEORGE GILSON JR
Approved by me, as Mayor of the United City of Yorkville, Kendall County, Illinois, this
02(O day of -A Pk I L , A.D. 2012.
jtm �' 2ul
MAYOR
Resolution No. 2012-
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EXHIBIT "A"
United City of Yorkville
Capital Asset Policy
INTRODUCTION
Purpose
The purpose of this capital asset policy is to provide control and accountability over capital
assets, and to gather and maintain information needed for the preparation of financial statements.
Overview
This policy is herein established to safeguard and address the United City of Yorkville's
investment in property, which comprises a significant resource. This policy is meant to ensure
compliance with various accounting and financial reporting standards including Generally
Accepted Accounting Principles (GAAP), and Governmental Accounting, Auditing, and
Financial Reporting (GAAFR).
Furthermore, this policy is meant to reflect the United City of Yorkville's desire to meet the
reporting requirements set forth in the Governmental Accounting Standards Board (GASB)
Statement No. 34. Specifically, the GASB Statement 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 is used to
calculate the depreciation expense. The Statement also requires disclosure of major classes of
assets, beginning and end-of-year balances, capital acquisition, sales/dispositions, and current-
period depreciation expense.
Definitions
Accumulated Depreciation — The total reduction in value over time of an asset since its
acquisition, which is recorded for financial statement purposes.
Acquisition Cost/Value — Assets should be recorded and reported at their historical costs, which
include the vendor's invoice, freight charges, initial installation cost, modifications, attachments,
accessories or apparatus necessary to make the asset usable and render it into service. Historical
costs also include ancillary charges such as site preparation costs and professional fees.
Additions — Newly acquired assets or modifications to existing assets. Modifications include
capital outlays that increase the capacity, the useful life or efficiency of the asset. A change in
capacity increases the level of service provided by an asset. A change in efficiency maintains the
same service level, but at a reduced cost.
Appraised Value — The estimated value of an asset based on the expertise of a qualified
independent appraiser.
Building—A roofed, enclosed facility intended for the permanent or temporary shelter of persons,
animals,plants or equipment.
Building Improvements — Capital costs that increase the value of a building. A building
improvement should be capitalized as betterment and recorded as an addition of the value of the
existing building if the expenditure for the improvement is at the capitalization threshold. The
depreciable life of the improvement is calculated separately from the original building cost.
Capital Asset— A permanent item with a useful life that extends beyond one year, which is held
for purposes other than investment or resale. Capital assets include land, land improvements other
than buildings, infrastructure, buildings, machinery, equipment, vehicles and services necessary
to the construction of infrastructure which are of long-term value.
Construction in Progress — An asset that is comprised of the substantially incomplete
construction costs of,typically, a road or building.
Date Placed in Service—The date at which the capital asset becomes available for use.
Depreciation — A method for allocating the acquisition cost/value of capital assets over time.
GAAP requires that the value of capital assets must be written off as an expense ("depreciation
expense") over the useful life of the asset.
Disposition—The final status of an asset when it is removed from the capital asset accounts and is
no longer physically located on the Government's property, e.g., upon sale, scrap, or donation.
Half-Year Convention—A depreciation convention that treats all property placed into service (or
disposed of) during the fiscal year as being placed into service (or disposed of) at the midpoint of
that year.
Infrastructure—Assets that are long-lived capital assets that normally are stationary in nature and
can be preserved for a significantly greater number of years than most capital assets. They include
highways, ramps, bridges, retaining walls, parking lots, and sidewalks that the Government has
purchased/constructed/accepted to fulfill its mission.
Improvements other than Buildings — A modification to an outside area, other than repairs, e.g.,
sidewalks,parking lots,utility lines, fences.
IT Equipment - All computerized and auxiliary automated equipment used in information
handling, storage and retrieval and all voice, video, data communications and other
communications systems equipment and controls.
Land — The surface or crust of the earth, which can be used to support structures, and may be
used to grow crops, grass, shrubs and trees. Land is characterized as having an unlimited life
(indefinite) and is not depreciated.
Land Improvements — Betterments, site preparation and site improvements (other than building
and infrastructure)that ready land for its intended use. The costs associated with improvements to
land are added to the cost of the land and are not depreciated.
Leasehold Improvements — Construction of new buildings or improvements made to existing
structures by the Government or its lessee, who has the right to use these leasehold improvements
over the term of the lease. The improvements will revert to the lessor (Government) upon
expiration of the lease. Moveable equipment or office furniture that is not attached to the leased
property is not considered a leasehold improvement.
Leased Equipment — Leased equipment should be capitalized (Capital Lease) if the lease
agreement meets any one of the following four criteria:
• The lease transfers ownership of the property to the lessee (Government) by the end of the lease.
• The lease contains a bargain purchase option.
• The lease term is 75 percent or more of the estimated economic life of the leased property.
• The present value of the minimum lease payments at the inception of the lease, excluding
executory costs, equals at least 90 percent of the fair value of the leased property.
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Machine (Machinery) — any mechanical or electrical device that transmits or modifies energy to
perform or assist in the performance of human tasks.
Maintenance — Activities related to the repair and upkeep of an asset, with the intent of
preserving the asset's original useful life and function. Costs associated with maintenance are not
capitalized.
Market Value — The cost to acquire an item in its current condition through an arm's length
transaction. Also referred to as "fair market value" or"fair value".
Net Book Value — The difference between the acquisition cost and accumulated depreciation. At
the time of acquisition book value equals acquisition cost/value.
Renovation — Construction activity that changes and/or improves the function of all or part of a
facility.
Scrap Equipment — An item that can be discarded as worthless or broken down into parts for
disposal or salvage.
Surplus Equipment—An item or items that are no longer needed or required.
Useful Life — The period over which a capital asset has utility to the Government in performing
the function for which it was purchased.
Vehicles—Automobiles and trucks. This asset category includes any additions needed to allow a
vehicle to perform its function such as a plow being added to a pickup truck to enable it to move
snow. Each vehicle addition will have a separate asset number.
INVENTORY,VALUING, CAPITALIZING AND DEPRECIATION
Capital Asset Inventory
Responsibility for control of capital assets will rest with the operating department wherein the
asset is located. The Finance Department shall ensure that such control is maintained by
establishing an inclusive capital asset inventory schedule. Asset purchases, which fall below the
capitalization threshold, will not be included in the capital asset inventory.
Each department will be responsible for notifying the Finance Department regarding fixed asset
additions, disposals and transfers. The Department Head, or their designee, shall provide the
Finance Department with the following information:
• Asset Description—A description of the asset(serial#,model#, VIN#, etc.)
• Asset Classification (Land and Land Improvements, Building and Building
Improvements, Vehicles,Machinery and Equipment, and Infrastructure Assets)
• Department name and physical location of asset
• Date asset was purchased/acquired
• Cost of Asset
• Method of acquisition(purchased or donated)
• Estimated useful life
The capital asset inventory list will be maintained by the Finance Department, and will be
periodically reviewed by each applicable City Department Head, or their designee.
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Valuing Capital Assets
Capital assets should be valued at historical cost, plus those costs necessary to place the asset in
its location (i.e. freight, installation charges.) In the absence of historical cost information, a
realistic estimate will be used. Donated assets will be recorded at their estimated current fair
market value.
Capitalizing
When to Capitalize Assets:
Assets are capitalized at the time of acquisition. To be considered a capital asset for financial
reporting purposes an item must be at or above the capitalization threshold (refer to schedule on
page 5)and have a useful life of at least two years.
Assets Not Capitalized.•
Capital assets below the capitalization threshold (refer to schedule on page 5) but warranting
"control" shall be inventoried at the departmental level and an appropriate list will be maintained.
Capital Assets should be capitalized if they meet the following criteria:
• Tangible
• Useful life of more than one year(benefit more than a single fiscal period)
• Cost exceeds designated threshold (refer to schedule on page 5)
Routine repairs and maintenance, e.g., intermittent pavement repairs and pothole patching, are not
capitalized but instead charged as an expense in the current fiscal period.
Capital Assets include the following major classes of assets:
Land and Land Improvements — Capitalized value is to include the purchases price
plus costs such as legal and filing fees; improvements such as parking lots, fences, and
pedestrian bridges.
Building and Building Improvements—Costs include purchase price plus costs such as
legal fees and filing fees; improvements include structures and all other property
permanently attached to, or an integral part of the structure. These costs include re-
roofing, electrical/plumbing, carpet replacement and HVAC.
Vehicles—Costs include purchase price plus costs such as title®istration.
Machinery and Equipment — Assets included in this category are heavy equipment,
traffic equipment, generators, office equipment and phone systems.
Infrastructure Assets — Infrastructure Assets are long-lived capital assets that are
stationary in nature and normally can be preserved for a significantly greater number of
years than most capital assets.
Depreciation
Depreciation is computed on a straight-line method. Additions or improvements to existing fixed
assets will only be capitalized if the cost either enhances the asset's functionality or extends the
asset's useful life. All capital asset additions will be depreciated using the half-year convention.
Projects in process will be added to the asset base as the projected expenses are incurred.
However,the project will first need to meet its individual asset class threshold.
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Capital Assets Useful Lives and Thresholds are as follows:
Useful Capitalization
Life Threshold
Land (including Right-of-Way) N/A $ 25,000
Land Improvements N/A 25,000
Buildings 10-50 Years 35,000
Building Improvements 10-20 Years 25,000
Machinery& Equipment 5-75 Years 5,000
Vehicles 5-15 Years 5,000
Software 2-5 Years 25,000
Infrastructure—Street & Storm Sewer 10-75 Years 50,000
Infrastructure—Water& Sewer 10-75 Years 75,000
OTHER
Disposal of Capital Assets
When a capital asset is disposed of, sold, or retired, its cost and accumulated depreciation are
removed from the City's capital asset accounts and a gain or loss, if any, is recognized. An asset
is removed from the capital asset accounts when it is determined that the asset is no longer
operable, has been replaced, or is no longer available for use. Retirement may consist of sale,
scrap or donation of the asset. The disposal of any capital asset must follow the procedures
established by the City Council. In addition, all capital asset retirements, and related
documentation, must be reported to the Finance Department.
Lost or Stolen Property
When suspected or known losses of inventoried assets occur, the Department responsible for the
assets should conduct a search for the missing property. The search should include transfer to
another department, storage, scrapping and surplus property. If the missing property is not found,
the department must report the loss to the City Administrator.
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