The school district will establish and maintain a capital assets management system for reporting capitalized assets owned or under the jurisdiction of the school district in its financial reports in accordance with generally accepted accounting principles (GAAP) as required or modified by law; to improve the school district's oversight of capital assets by assigning and recording them to specific facilities and programs and to provide for proof of loss of capital assets for insurance purposes.
Capital assets, including tangible and intangible assets, are reported in the government-wide financial statements (i.e. governmental activities and business type activities) and the proprietary fund financial statements. Capital assets reported include school district buildings and sites, construction in progress, improvements other than buildings and sites, land and machinery and equipment. Capital assets reported in the financial reports will include individual capital assets with an historical cost equal to or greater than $2,000. The Federal regulations governing school lunch programs require capital assets attributable to the school lunch program with a historical cost of equal to or greater than $500 be capitalized. Additionally, capital assets are depreciated over the useful life of each capital asset.
All intangible assets with a purchase price equal to or greater than $2,000 with useful life of two or more years, are included in the intangible asset inventory for capitalization purposes. Such assets are recorded at actual historical cost and amortized over the designated useful lifetime applying a straight-line method of depreciation. If there are no legal, contractual, regulatory, technological or other factors that limit the useful life of the asset, then the intangible asset needs to be considered to have an indefinite useful life and no amortization should be recorded.
Phase III districts, as determined under GASB 34, will not retroactively report intangible assets. If actual historical cost cannot be determined for intangible assets due to lack of sufficient records, estimated historical cost will be used.
This policy applies to all intangible assets. If an intangible asset that meets the threshold criteria is fully amortized, the asset must be reported at the historical cost and the applicable accumulated amortization must also be reported. It is not appropriate to “net” the capital asset and amortization to avoid reporting. For internally generated intangible assets, outlays incurred by the government's personnel, or by a third-party contractor on behalf of the government, and for development of internally generated intangible assets should be capitalized.
The capital assets management system must be updated annually to account for the addition/acquisition, disposal, relocation/transfer of capital assets. It is the responsibility of the superintendent to count and reconcile the capital assets with capital assets management system on June 30 each year.
It is the responsibility of the superintendent to develop administrative regulations implementing this policy. It will also be the responsibility of the superintendent to educate employees about this policy and its supporting administrative regulations.
An intangible asset should be recognized in the statement of net assets only if it is identifiable which means the asset is either separable or, arose from contractual or other legal rights, regardless of whether those rights are transferable or separable. The intangible asset must also possess all of the following characteristics/criteria:
♣ lack of physical substance;
♣ be of a nonfinancial nature (not in monetary form like cash or investment securities); and,
♣ the initial useful life extending beyond a single reporting period.
Legal Reference: Iowa Code §§ 257.31(4); 279.8; 297.22-.25; 298A (2013).
Cross Reference:
709 Insurance Program
701.3 Financial Records
Approved March 2011
Reviewed October 2016
Revised
A. Capital Assets Management System
The superintendent, and/or other designated staff, shall:
1) Conduct the capital assets physical count;
2) Develop the capital assets listing;
3) Tag capital assets included in the capital assets management system with a bar code identification number;
4) Make a recommendation of a computer software program for managing the capital assets management system;
5) Enter the necessary data into the capital assets management system and compile the appropriate reports;
6) Develop forms and procedures for maintaining the integrity of the capital assets management system; and,
7) Maintain responsibility for an accurate capital assets management system.
B. Determining historical cost
1. The historical cost of a capital asset is based on the actual costs expended in making the capital assets serviceable.
2. Gifts of capital assets are valued at the estimated fair market value at the addition/acquisition date.
3. Capital assets purchased under a capital lease are valued at historical cost of their net present value of the minimum lease payments on the addition/acquisition date.
4. The historical cost of capital assets must include capitalized interest.
C. Annual capital assets listing reconciliation
1. The superintendent, and/or other designated staff, in conjunction with the capital assets management team, will conduct an annual capital assets physical count to develop the annual capital assets listing in a manner similar to the initial capital assets listing process in B above. At least every three years, someone other than the person in custody of the capital assets in the building/department/room will perform the capital assets physical count for the building/department/room.
2. Upon completion of the annual capital assets listing, the capital assets listing is reconciled to the capital assets management system data base.
3. Capital assets found to have been excluded from the data base are added to the capital assets management system. The capital assets management system process should be reviewed to prevent future incidents of excluding a capital asset.
4. Capital assets unaccounted for are reported to the superintendent who contacts the supervisor of and the individual in charge/control/custody of the capital asset. The individual in charge/control/custody of the capital asset has thirty days to account for the capital asset.
5. Capital assets unaccounted for after thirty days are reported to the superintendent for appropriate action and documentation. "Appropriate action" may include discipline, up to and including discharge, and may require the employee/person in charge/control/custody of the capital asset to replace the asset.
6. The superintendent is responsible for documenting the reasons each asset was not reconciled to the capital assets management system.
D. Addition/acquisition of capital assets.
1. The school district's purchasing policy and administrative regulations must be followed when acquiring capital assets. The school district's policy and administrative regulations must be followed for receiving a gift of capital assets.
2. The capital assets addition/acquisition documentation must be completed for each additional capital assets with an addition/acquisition cost of equal to or greater than $2,000. The following information should be collected, if applicable:
a. Name of location-building/department/room;
b. Location-building/department/room code;
c. Balance sheet accounting/class code;
d. Government or BTA program;
e. Addition/acquisition date;
f. Check/purchase order number or gift;
g. Bar code identification number assigned to and placed on the capital asset;
h. Serial/model number;
i. Cost-historical;
j. Fair market value on acquisition date (donated assets only);
k. Estimated useful life;
l. Vendor;
m. Purchasing fund and function;
n. Description of capital asset;
o. Department/person charged with custody,
p. Method of addition/acquisition-purchase, trade, gift etc.,
q. Quantity;
r. Replacement cost;
s. Addition/acquisition authorization; and,
t. Function for depreciation.
E. Relocation/transfer of machinery and equipment capital assets.
1. A capital assets relocation/transfer documentation must be completed prior to removing machinery and equipment capital assets from their current location. The following information must be collected:
a. Relocation/transfer date;
b. Quantity;
c. Bar code identification number;
d. Current location-building/department/room code;
e. Name of current location-building/department/room;
f. New location-building/department/room code;
g. Name of new location-building/department/room;
h. Date placed at new location-building/department/room;
i. Department/person charged with custody; and
j. Relocation/transfer authorization.
F. Disposal of capital assets
1. A Capital Assets disposal documentation must be completed prior to disposing of real property. The following information must be collected:
a. Disposal date;
b. Quantity;
c. Bar code tag identification number;
d. Legal description,
e. Location/Address;
f. Purchaser;
g. Disposal methods for real property trade, sale, stolen, etc.; and,
h. Disposal authorization
2. When assets are sold or disposed of, it is necessary to calculate and report a gain or loss in the statement of activities. The gain/loss is calculated by subtracting the net book value (historical cost less any accumulated amortization) from the net amount realized on the sale or disposal.
G. Lost, damaged or stolen capital assets.
1. A Lost, Damaged or Stolen Capital Assets Report must be completed when a capital asset has been lost, damaged or stolen. The following information must be collected:
Code No. 802.4R1
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CAPITAL ASSETS REGULATION
a. Date of loss, damage or theft;
b. Employee/person discovering;
c. Quantity;
d. Description of capital asset;
e. Bar code tag identification number;
f. Location-building/department/room;
g. Description of loss, damage, etc.;
h. Filing of police report-yes or no;
i. Filing of insurance report-yes or no;
j. Sent for repair-yes or no;
k. Date returned from repair;
l. Date returned to location-building/department/room;
m. Department/person charged with custody; and,
n. Authorization.
H. Capital assets reports
1. Annual reports for June 30 each year.
a. Capital assets listing including the following items:
1) Balance sheet accounting/class code;
2) Purchasing fund, function and depreciation function;
3) Bar code tag identification number;
4) Description of the capital asset;
5) Historical cost or other;
6) Location;
7) Current year depreciation/expense; and,
8) Accumulated depreciation/amortization.
b. Capital assets listing by location/building;
c. Capital assets listing by department/employee/person charged with custody; and,
d. Capital assets listing by replacement cost.
Back trending/standard costing - an estimate of the historical original cost using a known average installed cost for like units as of the estimated addition/ acquisition date. This cost is only applied to the fixed assets initially counted upon implementation of the fixed assets management system when the historical original cost cannot be determined. It is inappropriate to apply the back trending/standard costing method to any fixed assets acquired after the fixed assets management system implementation date.
Balance sheet accounting/class codes - the codes set out for fixed assets in the Iowa Department of Education Uniform Accounting Manual. They are: 211-sites; 221-site improvements; 222-accumulated depreciation on site improvements; 231-buildings and building improvements; 232-accumulated depreciation on buildings and building improvements; 241-machinery and equipment; 242-accumulated depreciation on machinery and equipment, 251-works of art and historical treasures, 252-accumulated depreciation on works of art and historical treasures, 261-infrastructure, 262-accumulated depreciation on infrastructure, and 271-construction in progress.
Book value - The value of fixed assets on the records of the school district, which can be the cost or, in the case of fixed assets in the proprietary fund, the cost less the appropriate allowances, such as depreciation.
Buildings and building improvements - A fixed assets account reflecting the addition/acquisition cost of permanent structures owned or held by a government and the improvements thereon.
Capital expenditures/expenses - expenditures/expenses resulting in the addition/acquisition of or addition/acquisition to the school district's general or proprietary fixed assets.
Capital fixed assets - fixed assets with a value of equal to or greater than ($ capitalization threshold) based on the historical cost.
Capitalization policy - the criteria used by the school district to determine which fixed assets will be reported as fixed assets on the school district’s financial statements and records.
Capitalization threshold - dollar limit set for capitalizing fixed assets.
Capitalized interest - interest accrued and reported as part of the cost of the fixed assets during the construction phase of a capital project. The construction phase extends from the initiation of pre-construction activities until the time the asset is placed in service.
Construction in progress - buildings in the process of being constructed other than infrastructure.
Contributed capital - the permanent fund capital of a proprietary fund. It is created when a residual equity transfer is received by a proprietary fund; a general fixed assets is "transferred" to a proprietary fund; or a grant received is restricted to a capital acquisition or construction.
Cost - the amount of money or other consideration exchanged for goods or services.
Depreciation - expiration in the service life of fixed assets, other than wasting assets, attributable to wear and tear, deterioration, action of the physical elements, inadequacy and obsolescence. In accounting for depreciation, the cost of a fixed asset, less any salvage value, is prorated over the estimated service life of such an asset, and each period is charged with a portion of such cost.
Fixed assets - long-lived tangible assets obtained or controlled as a result of past transactions, events or circumstances. Fixed assets include buildings, construction in progress, improvements other than facilities, land and machinery and equipment.
Fixtures - attachments to buildings that are not intended to be removed and cannot be removed without damage to the buildings. Those fixtures with a useful life presumed to be as long as that of the building itself are considered a part of the building. Other fixtures are classified as machinery and equipment.
General fixed assets - capital fixed assets that are not fixed assets of any fund, but of the governmental unit as a whole. Most often these fixed assets arise from the expenditure of the financial resources of governmental funds.
General fixed assets account group (GFAAG) - a self-balancing group of accounts established to account for fixed assets of the school district, not accounted for through specific proprietary funds.
Historical (acquisition) cost - the actual costs expended to place a fixed asset into service. For land and buildings, costs such as legal fees, recording fees, surveying fees, architect fees and similar fees are included in the historical cost. For machinery and equipment, costs such as freight and installation fees and similar fees are included in the historical cost.
Improvements other than buildings - attachments or annexation to land that are intended to remain so attached or annexed, such as sidewalks, trees, drives, tunnels, drains and sewers. Sidewalks, curbing, sewers and highways are sometimes referred to as "betterments," but the term "improvements" is preferred.
Infrastructure assets - public domain fixed assets such as roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, lighting systems and similar assets that are immovable and of value only to the governmental unit.
Investment in general fixed assets - an account in the GFAAG representing the school district's investment in general fixed assets. The balance in this account generally is subdivided according to the source of the monies that finance the fixed assets addition/acquisition, such as general fund revenues and special assessments.
Land and buildings - real property owned by the school district.
Machinery and equipment - fixed assets which maintain their identity when removed from their location and are not changed materially or consumed immediately (e.g., within one year) by use. Machinery and equipment are often divided into specific categories such as: transportation machinery and equipment which includes school buses and school district owned automobiles, trucks and vans; other motor machinery and equipment which includes lawn maintenance machinery and equipment, tractors, motorized carts, maintenance machinery and equipment, etc.; other machinery and equipment which includes furniture and machinery and equipment contained in the buildings whose original cost is equal to or greater than ($ capitalization threshold), and fixed assets under capital leases and fixed assets being acquired under a lease/purchase agreement.
Proprietary fund fixed assets - capital fixed assets that are fixed assets specific to a proprietary fund, such as school nutrition fund or child care fund. Most often these fixed assets arise from the expenditure of financial resources of a proprietary fund.
Replacement cost - the amount of cash or other consideration required today to obtain the same fixed assets or its equivalent.