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Town of XXX Tangible Capital Assets Policy Draft

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Town of Greater Napanee Tangible Capital Assets Policy
- Draft
General
It is the policy of the Town of Greater Napanee to record the tangible capital assets
controlled by the Town. These include capital assets that are owned and those under
capital lease.

Purpose
The goal of this policy is to ensure that the Town’s investment in tangible capital assets
is recorded appropriately and accurately. This policy will aid in the achievement of the
following goals:
          To ensure that legislative and policy requirements to establish and maintain
           asset accounting records are met. This includes compliance with PSAB 3150.
          To improve the understanding of asset accounting processes by all stakeholders;
           and
          To apply consistent accounting treatment of asset related expenditures.
Scope
This policy applies to tangible capital assets. The policy includes all Town of Greater
Napanee departments and all other organizations falling within the reporting entity of the
Town. This includes the Business Improvement Area (BIA) and Greater Napanee
Utilities.
Tangible Capital Assets
Tangible capital assets are non-financial assets having physical substance that:
            are held for use in the production or supply of goods and services, for rental to
             others, for administrative purposes or for the development, construction,
             maintenance or repair of other tangible capital assets;
            have useful economic lives extending beyond one year;
            are to be used on a continuing basis; and
            are not for sale in the ordinary course of operations.
            Tangible capital assets include computer software.

Although works of art and historical treasures will not be recognized as tangible capital
assets in government financial statements, notes to the financial statements must
disclose the nature of any works of art and historical treasures.
The following capital assets are excluded from the Tangible Capital Asset policy:
          Intangible assets, natural resources and Crown lands that have not been
           purchased by the government. Intangible assets include copyrights, trademarks,
           patents, easements and goodwill.
          Assets held for sale if all of the following criteria are met:
                                             2

       a) Prior to the date of the financial statements, the government body,
          management board or an individual with the appropriate level of authority
          commits the government to selling the asset;
       b) The asset is in a condition to be sold;
       c) The asset is publicly seen to be for sale;
       d) There is an active market for the asset;
       e) There is a plan in place for selling the asset; and
       f) It is reasonably anticipated that the sale to a purchaser external to the
          government reporting entity will be completed within one year of the reporting
          date.

      Studies and other initiatives that are more general in nature and do not relate
       directly to the development, construction or acquisition of a specific Tangible
       Capital Asset. For example, the creation of an Official Plan is expensed in the
       year in which it occurs since it is not related to the development, construction or
       acquisition of a specific Tangible Capital Asset.


When to Account For Tangible Capital Assets
A tangible capital asset should be accounted for and recognized in the financial
statements when:
      It is probable that future benefits associated with the tangible capital asset will be
       obtained; and,
      There is an appropriate basis of measurement and a reasonable estimate of the
       value of the asset can be made.

Although every effort will be made to reasonably value all assets, during the initial phase
of this project it may not be possible to determine a value for every asset being reported.
When a cost cannot be determined for an asset, it will be reported at a nominal value.

Amortization

      Amortization is the accounting process of allocating the cost of a tangible capital
       asset to operating periods as an expense over its useful life in a systematic
       manner appropriate to its nature and use. All assets will be amortized using the
       straight line method. The estimated useful life of the remaining unamortized
       portion should be reviewed on a regular basis and revised when the
       appropriateness of a change can be clearly demonstrated. The amortization
       method should also be reviewed on a regular basis and revised when the
       appropriateness of a change can be clearly demonstrated. Significant events
       that may indicate a need to revise the amortization method for a tangible capital
       asset include:
       a) A change in the extent to which the tangible capital asset is used;
       b) A change in the manner in which the tangible capital asset is used;
       c) Removal of the tangible capital asset from service for an extended period of
           time;
       d) Physical damage
       e) Significant technological developments;
                                             3

       f) A change in the demand for the services provided through use of the tangible
          capital asset; and
       g) A change in the law or environment affecting the period of time over which
          the tangible capital asset can be used.

Amortization will begin on the acquisition date. The acquisition date of a tangible capital
asset is the earliest of:

      The date on which the tangible capital asset being constructed is complete and
       ready to be put into service. Amortization will begin when the capital project is
       closed. Therefore, capital projects must be closed as soon as the asset is put
       into service. In cases where the capital project must be kept open, the project
       will be deemed to be complete, and will begin amortization when the certificate of
       substantial completion is received. For projects that do not receive a certificate
       of substantial completion, amortization will begin when the asset is available for
       use;
      The date legal ownership of the tangible capital asset is obtained by the Town;
       or
      The purchase date.

      Amortization will be prorated from the acquisition month or the month the
       constructed asset is available for use.


Useful Life of a Tangible Capital Asset

      The useful life of an asset or part of an asset is the period over which an asset is
       expected to be used. The estimated useful life of the asset will be established by
       collaboration between operating departments and Corporate Services.
      Useful life is normally the shortest of the asset’s physical, technological,
       commercial or legal life.
      The useful life of a tangible capital asset depends on its expected use by the
       government. Factors to be considered in estimating the useful life of a tangible
       capital asset include:
       a) Expected future usage;
       b) Effects of technological obsolescence;
       c) Expected wear and tear from use or the passage of time;
       d) The maintenance program;
       e) Studies of similar items retired; and
       f) The condition of existing comparable items.

      Financial reporting standards require the useful life of an asset to be reviewed on
       a regular basis. If expectations differ from previous estimates, the change in
       useful life is to be accounted for as a change in an accounting estimate.
       Significant events that may indicate a need to revise the remaining useful life of a
       tangible capital asset include:
       a) A change in the extent to which the tangible capital asset is used;
       b) A change in the manner in which the tangible capital asset is used;
                                             4

       c) Removal of the tangible capital asset from service for an extended period of
          time;
       d) Physical damage
       e) Significant technological developments;
       f) A change in the demand for the services provided through use of the tangible
          capital asset; and
       g) A change in the law or environment affecting the period of time over which
          the tangible capital asset can be used.
For a listing of assets and their useful lives, see Appendix B. During the inventory and
valuation stage, the list will be revised in consultation with various departments. A final
listing of useful lives will be included in the official Tangible Capital Asset Policy
document.

Tangible Capital Asset Cost
When acquired, tangible capital assets are measured at cost. Cost is the amount of
cash paid and/or the fair value of other assets given up in exchange for the asset. It
includes all charges, including carrying costs, necessary to place the asset in its
intended location and condition for use.
For a list of costs and their accounting treatments, see Appendix A.
Purchased Assets
      Cost is the gross amount of consideration paid to acquire the asset. It includes
       all non-refundable taxes and duties, freight and delivery charges, installation and
       site preparation costs, etc. It is net of any trade discounts or rebates.
      Cost of land includes purchase price plus legal fees, land registration fees,
       transfer taxes, etc. Costs would include any costs to make the land suitable for
       intended use, such as pollution mitigation, demolition and site improvements that
       become part of the land.
      When two or more assets are acquired for a single purchase price, it is
       necessary to allocate the purchase price to the various assets acquired.
       Allocation should be based on the fair value of each asset at the time of
       acquisition or some other reasonable basis if fair value is not readily
       determinable.
                                             5


Acquired, Constructed or Developed Assets
      Cost includes all costs directly attributable (e.g., construction, architectural and
       other professional fees) to the acquisition, construction or development of the
       asset. Carrying costs such as internal design, inspection, administrative, and
       other similar costs may be capitalized. Capitalization of general administrative
       overheads can be included if documentation provided clearly demonstrates a link
       to a particular capital project.
   The following table demonstrates different costs for constructed or developed assets
   and their accounting treatment:

                  Element                                Accounting Treatment
Equipment charges (e.g. fleet)               Capital cost for equipment used on the
                                             capital project
Mechanical equipment usage (oil, gas,        Capital cost for equipment used on the
maintenance)                                 capital project
Computer equipment usage (Technology         Capital cost for that portion that is directly
Services charge-back)                        attributable to the construction or
                                             development of the asset
Direct supervisor labour cost                Capital cost (proportional to capital work)
Management labour cost                       Capital cost (proportional to capital work)
Administration (e.g. clerical cost)          Operating expense
Support services – Financial Services        Operating expense
Support services – Budgets                   Operating expense
Support services – Payroll                   Operating expense
Support services – Purchasing                Operating expense
Support services – Realty Services           Operating expense
Licenses and inspection fee                  Capital cost (proportional to capital work)


       Capitalization of carrying costs should commence when expenditures are being
       incurred and activities that are necessary to prepare the asset for its intended
       use are in progress.
      Capitalization should be suspended during periods in which active development
       is interrupted.
      Capitalization should cease when substantially all of the activities necessary to
       prepare the asset for its intended use are complete.
Capitalization of Interest Costs
      Borrowing costs that are directly attributable to the acquisition, construction and
       production of an asset that takes a substantial period of time to get ready for its
       intended use should be capitalized as part of the cost of that asset.
                                            6


     Capitalization of interest cost should commence when expenditures are being
      incurred, borrowing costs are being incurred and activities that are necessary to
      prepare the asset for its intended use are in progress.
     Capitalization should be suspended during periods in which active development
      is interrupted.
     Capitalization should cease when substantially all of the activities necessary to
      prepare the asset for its intended use are complete.


Donated or Contributed Assets
     The cost of donated or contributed assets that meet the criteria for recognition is
      equal to the fair value at the date of construction or contribution. Fair value may
      be determined using market or appraisal values. Fair value may also be
      determined by an estimate of replacement cost.

Construction Work-In-Progress
     The total cost of tangible capital assets under construction that are not completed
      and not ready to be put into service should be reported as Work-In-Progress in
      the Town’s Statement of Financial Position. Although only one amount will be
      reported on this statement, the General Ledger will include a further break-down
      of Work-In-Progress by asset type.
     Work-in-Progress only applies to tangible capital assets that meet the
      capitalization threshold specific to their related asset type.
     Costs included in Work-In-Progress are identical to those for tangible capital
      assets.
     Capital projects tracking Work-in-Progress costs must be closed as soon as the
      asset is put into service in order to begin amortization. In cases where the
      capital project must be kept open, the project will be deemed to be complete, and
      will begin amortization when the certificate of substantial completion is received.
      For projects that do not receive a certificate of substantial completion,
      amortization will begin when the asset is available for use.

Pre-Construction Costs
     Pre-construction costs incurred prior to the actual acquisition or construction of a
      tangible capital asset will be accumulated separately for each tangible capital
      asset or project as Work-In-Progress (WIP). These costs should be capitalized
      only if future economic benefits are expected to be obtained. If in a subsequent
      period it is determined that the acquisition, development or construction of the
      tangible capital asset will not proceed, the costs accumulated as WIP will be
      expensed immediately. Examples of pre-construction costs include the costs for
      feasibility studies, engineering specifications, environmental assessment,
      consulting studies, and site survey directly attributable to a tangible capital asset.
                                              7


Capital Leases
A capital lease is defined as a lease that transfers substantially all the benefits and risks
incident to ownership to the government. A capital lease would normally occur when, at
the inception of the lease, one or more of the following conditions are present:
      There is reasonable assurance the lessee will obtain ownership of the leased
       property by the end of the lease term. This condition is usually signified when
       ownership does pass at the end of the lease or when the lease provides for a
       bargain purchase option.
      The lease term is of such duration that the lessee will receive substantially all of
       the economic benefits expected to be derived from the use of the leased property
       over its life span. The threshold for this benefits test is 75%.
      The minimum lease payments, excluding any portion relating to executors’ costs,
       are equal to 90% or more of the fair market value of the leased property at the
       inception of the lease.
To determine whether a lease is operating or capital, consideration should also be given
to the guidance provided in paragraphs 8-10 of PSG-2 in the PSAB handbook.
                                             8


Componentization
Tangible capital assets may be accounted for using either the single asset or component
approach. Whether the component approach is to be used will be determined by the
usefulness of the information versus the cost of collecting and maintaining information at
the component level.
The following table demonstrates the difference in accounting treatment between a
single asset approach and a component approach.
Option          Base Unit of Asset in             Accounting Treatment of Component
                Accounting Register                         Replacements
1          Asset = Building                      Replacement of entire building = capital
                                                 Replacement of roof = operating expense
                                                 Replacement of skylight = operating
                                                 expense
2          Asset 1 = Structural elements         Replacement of entire building = capital
           Asset 2 = Roof                        Replacement of roof = capital
                                                 Replacement of skylight = operating
                                                 expense
3          Asset 1 = Structural elements         Replacement of entire building = capital
           Asset 2 = Roof                        Replacement of roof = capital
           Asset 3 = Exterior doors &            Replacement of skylight = operating
           windows                               expense


4         Asset 1 = Structural elements          Replacement of entire building = capital
          Asset 2 = Roof                         Replacement of roof = capital
          Asset 3 = Exterior doors &             Replacement of skylight = capital
          windows
          Asset 4 = Skylights




For a list of suggested components and their useful lives, see Appendix B. During the
inventory and valuation stage, the list will be revised in consultation with various
departments. A final listing of components will be included in the official Tangible Capital
Asset Policy document.
                                              9


Asset Types – Town of XXX
Tangible capital assets must be classified in order to facilitate reporting. Asset types and
descriptions are provided in the table below:
 ASSET TYPE                                   DESCRIPTION
Land                 Real property in the form of a plot, lot or area.
                            Includes all expenditures made to acquire land and to
                             ready it for use where the improvements are considered
                             permanent in nature and includes purchase price,
                             closing costs, grading, filling, draining, clearing, removal
                             of old buildings (net of salvage), assumption of liens or
                             mortgages, and any additional land improvements that
                             have an indefinite life.
                            Excludes forests, water, other mineral resources and
                             land held for resale (a separate non-financial asset).
Land                 Land improvements consist of betterments, site preparation
Improvements         and site improvements (other than buildings) that ready land
                     for its intended use, and which generally decay or break down
                     over time.
                     Land improvements include but are not limited to:
                            construction of driveways, parking lots, retaining walls,
                             bike paths in parks, drop off locations, sidewalks in
                             parks, fencing, patios, water fountains, outdoor
                             swimming or wading pools, ball diamonds, soccer
                             fields, irrigation systems, tennis courts etc.
Buildings            Buildings include all structures that provide shelter from the
                     elements. It includes betterments to buildings that are owned
                     by the municipality.
                     Buildings include but are not limited to:
                            Bus transit facilities, sport and recreation facilities,
                             office buildings, fire stations, libraries, pavilions, change
                             rooms, park washrooms, concession buildings,
                             buildings in works yards etc.
Machinery &          An apparatus, tool, device, implement or instrument that uses
Equipment            energy to facilitate a process, function or completion of a task.
                     Machinery & Equipment may also include furniture and fixtures.
                     It may be installed within a building, but is generally capable of
                     being moved and reinstalled at a different location, if
                     necessary.
                     Machinery & Equipment includes but is not limited to:
                            HVAC, fire protection, library books, computer
                             hardware & software, push mowers, telephone
                             switches/networks, storm sewer pumps etc.
                                          10


 ASSET TYPE                                DESCRIPTION
Vehicles           A means of transportation, usually having wheels, for
                   transporting persons or things or designed to be towed behind
                   such an apparatus.
                   Vehicles include but are not limited to:
                         automobiles, trucks, trailers, ride on mowers, zambonis
                          etc.
Linear Assets      Assets constructed or arranged in a continuous and connected
                   network.
                   Linear assets include but are not limited to:
                         Systems such as storm drainage collection systems,
                          catch basins, manholes etc.
                         Assets associated with roadways such as roads,
                          bridges and culverts.
                         other assets such as street lights, traffic signals,
                          signage, sidewalks etc.
Capital Work-in-   The cost of tangible capital assets under construction or in an
Progress           incomplete process of acquisition by the municipality, and that
                   are not yet in service.
                                          11


Departments and Services
Each asset will also be classified according to its Department and Service. These
departments and services are defined in the following table:


  DEPARTMENT                                   SERVICE
Administration          Office of the CAO
                        Clerks, Finance
Public Works            Administration
                        Storm Water Management
                        Major Roads – Redevelopment
                        Major Roads – Growth Related
                        Local Roads
                        Rural Roads
                        Sidewalk/Trails – Non-Growth Related
                        Sidewalks/Trails – Growth Related
                        Stormwater Drainage – Redevelopment
                        Stormwater Drainage – Growth Related
                        Bridges/Culverts
                        Asphalt Overlay Program
                        Traffic
                        Street lighting
                        Fleet Equipment – Growth Related
                        Fleet Equipment – Replacement
                        Parking
Parks and Recreation    Parks Redevelopment/Improvements
                        Parks Growth Development
                        Parks Trails and Cycle ways
                        Parks Land Acquisition
                        Parks, Open Space
                        Fleet Equipment – Growth Related
                        Fleet Equipment - Replacement
                        Administration
                        Civic Facilities – Redevelopment/Improvements
                        Civic Facilities – Growth Related
                        Leisure Facilities – Redevelopment/Improvements
                        Leisure Facilities – Growth Related
                        Library
Planning &              Planning
Development             Building
                        Economic Development
Fire                    Fleet Equipment – Growth Related
                        Fleet Equipment – Replacement
                        Other
                                                         12


Tangible Capital Asset Thresholds
Tangible capital assets should be capitalized according to the following thresholds:
            ASSET TYPE                                   THRESHOLD
                                                                 Note 1

Land                                              $0 (capitalize all)
Land Improvements                                 $10k
Buildings & Building Improvements                 $10k (Note 2)
Leasehold Improvements                            $10k(Note 2)
Vehicles                                          $5K (Note 3)
Equipment                                         $5K (Note 3)
Linear Assets:
Storm Water Management                            $10K
(includes catch basins, manholes &
culverts under 9m.)
Roadways (includes bridges &                      $10K
culverts over 9 m.)
Other Linear Assets (includes                     $10K
street lights, traffic controllers &
sidewalks)

   Note 1 – Thresholds listed will be reviewed again at a later date. These are not necessarily the final thresholds that
   will be used for the implementation of tangible capital assets reporting.
   Note 2 – This threshold assumes a valuation based on components rather than the whole.
   Note 3 – Similar assets that have a unit value below the capitalization threshold but have a material value as a group
   can be combined to create a pool. Examples of assets that can be pooled are library books and computer hardware
   and software. During the Inventory & Valuation stage, the threshold for non-linear pooled assets will be $50K.
   When the official Tangible Capital Asset policy document is issued, the threshold for pooled assets will be the same
   value as the general threshold for that asset type.
                                             13


Betterments, Replacements and Repair & Maintenance
Betterments
Betterment is a cost incurred to enhance the service potential of a tangible capital asset.
Betterments increase service potential and may or may not increase the remaining
useful life of the tangible capital asset. Service potential is enhanced if one of the
following occurs:
      There is an increase in the previously assessed physical output or service
       capacity;
      Associated operating costs are lowered;
      The original useful life is extended; or
      The quality of the output is improved.
Betterments will be determined by collaboration between operating departments and
finance.
If the component being replaced had previously been segregated in the asset
accounting register as a distinct asset for amortization over its specific expected useful
life, then the new component is capitalized and the old component is retired with its
residual net book value removed from the accounts.
If the component being replaced was not significant enough to be previously segregated
from the whole asset as a distinct asset, then the replacement is normally considered a
repair and the costs are expensed as incurred (even if the component enhances the
service potential of the asset).
Betterments to existing assets may be capitalized when unit costs exceed the threshold.
Betterments vs. Replacements
Betterments and replacements both represent either additions to a capital asset or the
substitution of a component part of an asset. The difference is that betterment is a
substitution of a better component for the one currently used while replacement is a
substitution with a part or component that has the same type and performance
capabilities. Betterments may be capitalized when unit costs exceed the threshold.
Replacement costs should be expensed in the period.

Repair & Maintenance
Maintenance expenditures are incurred to repair or maintain the pre-determined service
potential of a tangible capital asset to the end of its original useful life. Maintenance and
repair costs should be expensed in the period.
Betterments vs. Repair & Maintenance
Betterments enhance the functionality, capacity and/or efficiency of the tangible capital
asset. These expenditures are not routine and occur only occasionally. Maintenance
expenses do not enhance the functionality, capacity or efficiency of the tangible capital
asset. They are usually incurred on a routine and continuous basis.
                                             14

Examples of costs that would be categorized as maintenance expenses include:
      Replacement of individual parts due to age, wear-and-tear and damage
      Repairs, including emergency repairs due to equipment failure
      Routine cleaning and servicing of equipment
      Repairs to restore assets damaged by fire, flood or similar events, to a condition
       just prior to the event; and
      Costs that must be incurred in order to realize the benefits originally projected for
       the tangible capital asset

Write-Down/Write-Off
A write-down is used to reflect a partial impairment in the value of a tangible capital
asset. The carrying value of a tangible capital asset should be written down if it can no
longer contribute to the Town’s ability to provide service at the previously anticipated
level and the impairment is permanent in nature.
A write-off is a 100% reduction in the cost of a tangible capital asset to reflect the decline
in the asset’s value due to a permanent impairment.
Once an asset is written down or off, the transaction cannot be reversed. An asset that
has been previously written down cannot be written up in a subsequent period. Similarly
an asset that has been written off cannot be written on at a later date.


Asset Disposal
Disposals occur when the ownership of a tangible capital asset is relinquished and may
occur by sale, loss, destruction or abandonment.
Net Book Value
Net book value of a tangible capital asset is its’ cost less accumulated amortization and
the amount of any write-downs.
Upon disposal of a tangible capital asset, whether by sale, loss, destruction or
abandonment, the difference between the net proceeds on disposal and the net book
value should be recognized as a gain or loss in the period the transaction to dispose of
the tangible capital asset is completed.

Gain on Disposal
A gain on disposal is the amount by which the proceeds realized upon the asset’s
disposal exceed the net book value of the tangible capital asset. The gain should be
accounted for as revenue.

Loss on Disposal
A loss on disposal is the amount by which the net book value of the tangible capital
asset exceeds the proceeds realized upon the asset’s disposal. The loss should be
accounted for as expense.
                                             15


Removals from Service
If the tangible capital asset is permanently removed from service and is not being used
by the government, amortization should cease and its carrying value should be written
down to its’ residual value. The write-down reflects the fact that the tangible capital asset
no longer contributes to the government’s ability to provide services.
                                           16


ACCOUNTABILITY
Departments are responsible for:
     preparing and managing capital budgets
     collaborating with Finance and Administration to provide life expectancy data of
      fixed assets defined under this guideline
     maintaining capital asset information such as location, condition, maintenance
      records etc.
     ensuring proper physical control of tangible capital assets is maintained
     appointing a steward for each capital asset, who is responsible for providing
      information about the availability, condition and usage of the asset
     ensuring timely communication of any changes, updates or relevant information
      (for example, asset purchases, disposals or betterments) with the Finance and
      Administration department
     providing Finance and Administration with appropriate documentation regarding
      any changes, updates or relevant information
     ensuring all leases are brought to the attention of Finance and Administration (to
      determine if a lease is capital or operating in nature)


Finance and Administration is responsible for:
     facilitating the approval of the capital budgets, giving due regard to municipal
      cash flow and debt management
     accounting for tangible capital assets in accordance with this policy
     conducting the month-end close for the fixed assets module, including the
      posting of amortization
     ensuring the asset register and the fixed asset module reflects the most current
      records and documentation provided by other departments
     reporting tangible capital assets in the financial statements of The Town of
      Greater Napanee
     ensuring regular and timely communications including consultation and input
      from other departments as it relates to this policy
     monitoring the application of this policy
     updating this policy on a regular basis
     recording capital leases appropriately
     performing periodic asset inventory reviews to ensure the asset ledger reflects
      tangible capital assets accurately
     determining if a lease is capital or operating in nature
     ensuring reporting requirements for PSAB 3150 are met
                                               17




Glossary of Terms
Amortization is the accounting process of allocating the cost of a tangible capital asset
to operating periods as an expense over its useful life in a systematic manner
appropriate to its nature and use. All assets will be amortized using the straight line
method.
Betterment is a cost incurred to enhance the service potential of a tangible capital
asset. Betterments increase service potential and may or may not increase the
remaining useful life of the tangible capital asset. Service potential is enhanced if one of
the following occurs:
      There is an increase in the previously assessed physical output or service
       capacity;
      Associated operating costs are lowered ;or
      The original useful life is extended.
Cost is the amount of cash paid and/or the fair value of other assets given up in
exchange for the asset. It includes all charges, including carrying costs, necessary to
place the asset in its intended location and condition for use.

Carrying Costs are costs directly attributable to an asset’s acquisition, construction or
development activity where, due to the nature of the asset, it takes a long period of time
to get it ready for its intended uses. Indirect overhead costs would be excluded.
Carrying costs include:

      technical and administrative work prior to commencement of, and during
       construction;
      overhead charges directly attributable to construction or development; and
      interest

Fair Value is defined in accounting standards as the amount for which an asset could
be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s
length transaction who are under no compulsion to act.
Pooled Assets are homogeneous in terms of their physical characteristics, use and
expected useful life.

Net Book Value of a tangible capital asset is its cost, less accumulated amortization
and the amount of any write-downs.
                                             18


Tangible capital assets are non-financial assets having physical substance that:
      are held for use in the production or supply of goods and services, for rental to
       others, for administrative purposes or for the development, construction,
       maintenance or repair of other tangible capital assets;
      have useful economic lives extending beyond one year;
      are to be used on a continuing basis; and
      are not for sale in the ordinary course of operations.

      Tangible capital assets include computer software.

Threshold Amount is the value above which assets are capitalized and reported in
the financial statements as tangible capital assets.
Useful Life of an asset or part of an asset is the period over which an asset is expected
to be used by an entity. Useful life is normally the shortest of the asset’s physical,
technological, commercial or legal life.
Write-down is used to reflect a partial impairment in the value of a tangible capital
asset. The carrying value of a tangible capital asset should be written down if it can no
longer contribute to the Town’s ability to provide service at the previously anticipated
level and the impairment is permanent in nature.
Write-off is a 100% reduction in the cost of a tangible capital asset to reflect the decline
in the asset’s value due to a permanent impairment.
                                         19


Appendix A – Costs and Their Accounting Treatment


                     Cost                                   Treatment
Master Plan costs                          Operating expense
Environmental assessments                  Capital cost (when associated with a
                                           Capital Project) if future benefits are
                                           expected to be obtained.
Feasibility study costs                    Capital cost if future benefits are expected
                                           to be obtained.
OMB hearings                               Operating expense
Development charges studies                Operating expense
Town Official plan                         Operating expense
Growth Management studies                  Operating expense
Grand Openings                             Operating expense
Permit & Inspection Fees                   Capital cost
Land acquisition costs                     Capital cost
Design and engineering fees                Capital cost
Site preparation costs                     Capital cost
Internal direct labour                     Capital cost
Direct materials                           Capital cost
Equipment usage (heavy & tools)            Capital cost
Legal and survey                           Capital cost
Contracted services                        Capital cost
Freight, transportation, insurance and     Capital cost
duties/brokerage fees
Supervision overhead                       Capital cost (proportional to capital work) if
                                           direct supervision.
Interest during construction               Capital cost
Decommissioning                            Capital cost
Rehabilitation                             Capital cost only if it meets the definition of
                                           betterment
Maintenance                                Operating expense
Repairs                                    Operating expense
Equipment charges (e.g. fleet)             Capital cost for equipment used on the
                                           capital project
                                        20


                    Cost                                   Treatment
Mechanical equipment usage (oil, gas,     Capital cost for equipment used on the
maintenance)                              capital project
Computer equipment usage (Technology      Capital cost for that portion that is directly
Services charge-back)                     attributable to the construction or
                                          development of the asset
Direct supervisor labour cost             Capital cost (proportional to capital work)
Management labour cost                    Capital cost (proportional to capital work)
Administration (e.g. clerical cost)       Operating expense
Support services – Financial Services     Operating expense
Support services – Budgets                Operating expense
Support services – Payroll                Operating expense
Support services – Purchasing             Operating expense
Support services – Realty Services        Operating expense
Licenses and inspection fee               Capital cost (proportional to capital work)
                                         21


Appendix B - Asset Useful Lives
Type of             Asset Description                Useful
Asset                                                Life in
                                                     Years
Land Improvements
            Swimming Pool                              45
            Fountains                                  20
            Outdoor Lighting                           20
            Patios                                     25
            Soccer Fields                              25
            Baseball Diamond                           25
            Basketball Court                           25
            Bleachers                                  20
            Landscaping                               10-20
            Fencing                                    20

Buildings
            Administrative Buildings - Structure        50
            Leisure Centre/Rotary Park -                50
            Structure
            Arenas - Structure                          50
            Fire Stations - Structure                   50
            Works Buildings - Structure                 50
            Roof                                        25
            Storage Domes                               25
            Library - Structure                         50
            Park Buildings - Structure                  50

Equipment
            Books                                       10
            Computer Software                            3
            Computer Hardware                            3
            Photocopiers/Printers                        5
            Playground Equipment                        15
            HVAC                                        25
            Fire Panel/Alarm                            20
            Boilers                                     20
            Chillers                                    30
            Rink Piping                                 30
            Unit Heaters                                20
            Fuel Storage Tanks                          30

Vehicles
                                                   Over the life
            Licensed Vehicles                      of the lease
            Municipal Equipment:
            Light Vehicles GTW<4500 Kg                  5
                                                22


Type of                Asset Description             Useful
Asset                                                Life in
                                                     Years
                Medium Vehicles GTW 4500-900 Kg        10
                Heavy Vehicles GTW> 9000Kg             15
                Off-Road Vehicles:
                Light off Road <$30K (ride-on          10
                mowers)
                Med. Off Road $30K-$100K (utility      12
                tractor)
                Heavy Off Road >$100K (graders)        15
                Transit:
                Buses                                  18
                Light Vehicle                          12
                Fire:
                Fire Trucks & Other Large Vehicles     20
                Light Vehicle                          12

Linear Assets
                Road Surface:
                Rural                                  20
                Semi-urban arterial/collector          20
                Semi-urban local                       20
                Urban local                            20
                Road Substructure                      20
                Curbs                                  20
                Sidewalks                              20
                Bridges:
                Deck                                   75
                Structure                              75
                Culverts:
                Major (above 9 m.)                     75
                Small (below 9 m.)                     75
                Right-of-Way:
                Signs                                  10
                Traffic Lights                         15
                Street Lights:                         15
                Storm Sewer System:
                Manholes                               50
                Drains                                 90
                Catch Basins                           75

				
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