Chapter 4.35


4.35.010    Definition of capital asset.

4.35.020    Capitalization threshold for tangible assets.

4.35.030    Capitalization threshold for infrastructure assets.

4.35.040    Depreciation.

4.35.050    Asset control.

4.35.060    Asset verification/inventory.

4.35.010 Definition of capital asset.

(1) Capital assets are major assets that benefit more than a single fiscal period. Examples are: land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and various intangible assets.

(2) Capital assets may be either intangible (e.g., easements, water rights) or tangible (e.g., land, buildings, vehicles, machinery, equipment and infrastructure). It is incumbent to maintain adequate control over all of our resources, including capital assets, to minimize the risk of loss or misuse.

(3) Capital assets should be reported at their historical cost. In the absence of historical cost information, the asset’s estimated historical cost may be used. Assets donated by outside parties should be reported at their fair value on the date the donation is made. The historical cost of a capital asset should include all of the following:

(a) Ancillary charges necessary to place the asset in its intended location (freight charges, for example).

(b) Ancillary charges necessary to place the asset in its intended condition for use (installation and site preparation charges, for example).

(4) The historical cost of a capital asset should include the cost of any subsequent additions or improvements but exclude the cost of repairs. An addition or improvement either enhances a capital asset’s functionality (effectiveness or efficiency), or it extends a capital asset’s expected useful life. [Res. 2008-12-1 (Att. § 1).]

4.35.020 Capitalization threshold for tangible assets.

(1) Capitalization thresholds are best applied to individual items rather than to groups of similar items (e.g., desks and tables).

(2) Outlays for capital items as defined in CVWDC 4.35.010 with a unit cost (including ancillary costs) of $5,000 or greater shall be capitalized.

(3) The monetary threshold as defined in this subsection should periodically be reviewed for consistency with the Government Finance Officers Association’s “Recommended Practices” guidelines.

(4) As a recipient of federal awards, we should be aware of federal requirements that may prohibit capitalization levels in excess of $5,000 (current level) for certain classes of assets acquired with grant funds. [Res. 2008-12-1 (Att. § 2).]

4.35.030 Capitalization threshold for infrastructure assets.

(1) In accordance with the Governmental Accounting Standards Board statement number 34, acquisition of capital assets defined as infrastructure, CVWDC 4.35.010(1), are to be capitalized. By nature, infrastructure assets normally are expected to exceed any capitalization threshold as established in CVWDC 4.35.020(3). Infrastructure assets may be grouped into networks or subsystems rather than reported as individual items for purposes of capitalization and depreciation.

(2) Infrastructure assets may reasonably be expected to continue to function indefinitely if they are adequately preserved and maintained. Accordingly, GAAP allows the modified approach to infrastructure reporting. The modified approach allows an entity to forgo reporting depreciation in connection with networks or subsystems of infrastructure assets, provided that we have made a commitment to maintain those networks or subsystems at a predetermined condition level of our choosing and have established an adequate asset management system. [Res. 2008-12-1 (Att. § 3).]

4.35.040 Depreciation.

(1) Depreciation will begin in the year the asset is purchased or completed, and accepted. However, if it is not placed into service immediately, depreciation should begin when the asset begins to lose value. These options should be applied consistently and should be reasonable in the circumstance.

(2) Depreciation should be calculated using the straight-line method and should be reported in financial statements for proprietary funds.

(3) Non-depreciable capital assets include:

(a) Land;

(b) Art collections;

(c) Construction in progress.

(4) Useful Life for Capital Assets. The useful life for assets acquired in new condition should be consistent with standards pursuant to the GFOA publication “Recommended Practices for State and Local Governments.” A shorter or longer estimated life may be used depending on factual circumstances, replacement policies, or industry practices.

(5) Infrastructure assets will be depreciated using the straight-line method. Infrastructure assets will be depreciated over the useful life of the network or subsystem. Most networks will have a useful life ranging from 30 to 70 years. [Res. 2008-12-1 (Att. § 4).]

4.35.050 Asset control.

(1) All tangible capital assets that can be labeled shall have a pre-numbered Cross Valley Water District tag attached in a prominent location. Assets that do not meet the capital asset threshold requirements in CVWDC 4.35.020 may also be tagged where there is a need for property control and accountability. The identification tags will be supplied by finance.

(2) When assets are relocated and there is a change of user, it is necessary to inform finance.

(3) The district may frequently need to sell or convey equipment or property that is no longer needed for district purposes. Some assets are auctioned off at a public auction or sold.

(4) Assets that have no value or further use, with proper documentation may be donated or destroyed. [Res. 2008-12-1 (Att. § 5).]

4.35.060 Asset verification/inventory.

(1) All assets that meet the district’s capitalization policy are to be maintained within a capital asset inventory system that includes records for all inventoriable assets.

(2) On an annual basis, physical inventory of capital assets should be performed to verify their existence. Finance will provide a listing of their respective capital assets to facilitate the inventory process. The listing should be manually verified to indicate that the asset exists. If the asset is not found, indicate on the listing the following disposition remarks: removed, lost, surplused, traded, transferred, sold, or junked. Each employee is responsible for the assets they have been assigned. [Res. 2008-12-1 (Att. § 6).]