LTDL Capital Asset Policy

PURPOSE:

To establish a uniform basis for recording and management of the Library’s capital assets in accordance with applicable standards and Library Board authorizations. 

The primary goals of this policy are:

• To ensure that the agency’s capital assets are accounted for in conformance with generally accepted accounting principles (GAAP), criteria prescribed by the Governmental Accounting Standards Board (GASB) and State and Federal requirements as applicable; and
• To establish a consistent and cost-effective method for accounting for the Library’s capital assets.

• To establish a consistent basis for depreciating the Library’s capital assets and determining their remaining valuations over their useful lives.

POLICY STATEMENT:

It shall be the general financial policy of the LTDL to purchase capital assets from the most economical sources, given the relative factors of quality and cost involved, utilizing competitive procurement and to record, utilize, and manage capital assets based upon the following criteria:

As a general rule, capital assets should be recorded as such only if they have a useful life of at least two (2) years following the date of acquisition within the applicable cost thresholds for the various types of capital assets.

Capitalization thresholds should be applied to individual assets rather than to groups of similar items (e.g., desks, tables).  For assets that qualify for capitalization and depreciation under the “group method”, however, see further information below under the heading “Capitalization Thresholds” for discussion of the appropriate application.

As a general rule, capitalization thresholds should be designed to encompass approximately 80% of the Library’s total non-infrastructure capital assets.

In no case should the Library establish a capitalization threshold of less than $1,000 for any individual asset item acquired on or after September 12, 2013.  However, financial control must still be exercised over non-capitalized smaller assets via establishing and maintaining adequate internal controls (i.e., procedures, records, periodic inventories and the like) within the Library.

All capital assets having an individual acquisition cost of $1,000 or more must be approved by the LTDL Board of Trustees prior to the acquisition.   

Capitalization Thresholds

The Library will capitalize individual assets which have an estimated useful life of at least two (2) years and which have an individual acquisition cost of $1,000 or more. However, assets acquired with debt proceeds may be capitalized regardless of cost.

Individual assets that cost less than $1,000 but operate as part of a network system may be capitalized in the aggregate, using the group method, if the estimated average useful life of the individual asset is at least two years. A network is determined based upon where the individual asset may be below $1,000 but are interdependent and the overall value to the Library is on the entire network and not the individual assets (e.g., computer and telephone systems).

Valuation

In accordance with generally accepted accounting principles, the Library will value its capital assets at historical cost. Historical cost includes the cost or estimated cost at the time of acquisition, freight charges, installation and site preparation charges, and the cost of any subsequent additions or improvements, excluding repairs. If a capital asset is donated to the Library, the asset will be valued based on the fair market value at the time the asset is donated.

Capital Assets Inventory Report

As part of the financial audit, the Library shall submit a capital asset report to the independent auditor on an annual basis. This report will include the following information:

• Type of asset (i.e. equipment, computer software system, capital improvements)

• Date of acquisition

• Acquisition cost

• Estimated useful life

• Annual depreciation

• Accumulated depreciation

Depreciation

The Library will use the Straight-Line Method as its “basic approach” (standard method) to depreciate capital assets.

Estimated Useful Lives

The useful lives for depreciating assets will be over a 2-50 year period as applicable given the individual asset item as documented in the Library’s financial management records.

Capital vs. Repair and Maintenance Expense

The following criteria are the basis for distinguishing costs as either capital or repair and maintenance expense:

With respect to improvements on capital assets, under the basic approach, costs should be capitalized if the useful life of the asset is substantially extended, or the cost results in a substantial increase in the capacity or efficiency of the assets. Otherwise, the cost should be expensed as repair and maintenance.

Disposal and Transfer of Library Assets

Disposition of Library assets will occur in accordance with applicable LTDL financial policies and procedures, and as may additionally be applicable under any grant management provisions where assets were acquired with state, federal or other grant funds.