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CORPORATION OF THE TOWN OF RAINY RIVER
Finance Department
Tangible Capital Assets Policy
Policy No.
F-9
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Purpose
A Tangible Capital Assets (TCA) Policy promotes compliance with the Public Sector
Accounting Board (PSAB) Handbook Section PSAB 3150. It provides overall direction for the
capitalization of assets, technical guidance in the creation of a tangible capital assets
accounting system and addresses areas of PSAB 3150 that may require professional
judgement. In addition, a TCA Policy provides a framework in which to make consistent and
sound decisions, plan ahead for future needs and provide public confidence in accounting
and financial reporting processes.
Financial Statements prepared for fiscal the year starting January 1, 2009 will require
compliance with PSAB 3150. Comparative figures for the year 2008 are also required.
Scope
All tangible property owned by the Town, either through donation or purchase, and which
qualifies as a tangible capital asset is included in the scope of this Policy.
Definitions
Tangible Capital Assets
In accordance with PSAB 3150, tangible capital assets are non-financial assets having
physical substance that:
i. are held for use in the production or supply of goods or services, for rental to others,
for administrative purposes or for the development, construction, maintenance or
repair of other tangible capital assets;
ii. have useful economic lives extending beyond an accounting period;
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iii. are to be used on a continuing basis; and
iv. are not for sale in the ordinary course of operations.
Tangible Capital Assets are recorded at historical cost. Where historical cost information is
not available, valuation approaches such as appraisals, the deflated replacement cost, the
deflated reproduction cost or fair value are to be applied where appropriate.
Cost as defined by PSAB 3150, is the gross amount of consideration given up to acquire,
construct, develop or better a TCA, and includes all costs directly attributable to acquisition,
construction, development or betterment of the TCA, including installing the asset at the
location and in the condition necessary for its intended use. The cost of a contributed TCA,
including a TCA in lieu of a developer charge, is considered to be equal to its fair value at the
date of contribution. Capital grants are not to be netted against the cost of the related TCA.
The cost of a leased TCA is determined in accordance with Public Sector Guidelines PSG-2,
Leased Tangible Capital Assets.
Fair Value is the amount of the consideration that would be agreed upon in an arm's length
transaction between knowledgeable, willing parties who are under no compulsion to act. For
assets owned by the Town but not paid for by the Town including contributions, gifts and
donations, valuation may be assessed by fair value.
Asset Categories
The level of detail required in the capital asset inventory is a balance between the cost of
data collection, tracking and analysis and the beneficial use of the information gathered. A
category of assets is a grouping of assets of a similar nature or function in the Town's
operations. The following list of categories and sub-categories shall be used:
CATEGORY
SUB-CATEGORY
Land
n/a
Parks Infrastructure
Playground Equipment, Pools, Fencing,
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Bleachers
Buildings & Improvements
Structure, Site Elements, Interior
Components, Exterior Components,
Mechanical/Electrical System, Elevator,
Site Services, Fire & Safety
Linear Infrastructure
Roads, Bridges, Water, Wastewater,
Drainage, Signs, Culverts
Technology / Communications
Hardware & Peripherals, Software, Radio
Equipment, Other
Vehicle, Machinery & Equipment
Licensed Vehicles, Unlicensed Equipment,
Attachments / Fixtures, Medical,
Operational, Misc. Equipment
Furniture and Fixtures
Office, Furniture
Capitalization Thresholds
Capitalization thresholds are established to determine whether expenditures are to be
capitalized as assets and depreciated or treated as current year expenditures. For financial
reporting purposes thresholds are set fairly high, however, details may be useful for the
Town's capital asset management program. Therefore, an optimal threshold for each asset
category is a balance between the two.
The Town's capitalization thresholds are set based on information gathered from various
industry sources and experts combined the consideration of the materiality of the asset
category.
ASSET CATEGORY
CAPITALIZATION
THRESHOLD
Land
Capitalize Only
Parks Infrastructure
5000
Buildings & Improvements
10,000
Infrastructure
10,000
Construction in Progress
Capitalize Only
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Technology/Communications
2,500
Vehicles, Machinery & Equipment
10,000
Furniture & Fixtures
2,500
Thresholds apply to capital goods purchased and capital projects constructed with the total
cost of the good or project meeting the capitalization threshold criteria. Long term assets
that do not individually meet threshold limits but do meet threshold limits when aggregated
are to be capitalized.
Further refinement to threshold levels will occur as the Town develops an understanding of
its asset and reporting needs. Improvements are capitalized when they extend the useful life
of the asset.
Classification, Aggregation & Segmentation
LAND
Land owned by the Town includes parkland, land for Town owned facilities and land under
roads and sidewalks. All land owned by the Town is segmented by each parcel held. Town
parkland and the land for Town facilities and leased facilities is quantified and included in the
Town's land database. Due to the age of the land under roads and sidewalks, existing Town
land under the roads and sidewalks are considered to have a nominal value of $1.
PARKS INFRASTRUCTURE
Parks infrastructure includes playground equipment, outdoor pools, and fencing. Each asset
when capitalized is separately recorded with an attached useful life.
BUILDINGS & IMPROVEMENTS
Buildings owned by the Town include Town Hall; Town facilities including public works
garage, water treatment plant, medical centre, curling club, pools, arenas and community
centers; and third party leased properties. A building is segmented by envelope, roof and
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equipment and other significant component parts based on useful life. This treatment
provides for capital replacement of each component over the years of ownership.
Building improvements include furniture, fixtures and equipment along with interior fit-outs
required to make the building ready for use. Furniture, fixtures, equipment and fit-outs are
capitalized if purchased in volume and the volume exceeds the threshold limit or if the
individual cost of individual items exceed the threshold.
CONSTRUCTION IN PROGRESS
Construction in progress contains capital projects underway but not complete or put to use.
These projects are individually segmented and are capitalized if costs exceed threshold
limits.
INFRASTRUCTURE
WATER
The water system components include and are segmented by water mains, valves, hydrants
and services. Aggregation for threshold purposes is by capital project. Capital projects when
complete are recorded as assets by allocating costs to each component part.
SEWER AND DRAINAGE
The sewer system components include and are segmented by sewer mains, pump stations,
manholes, catch basins and services. Aggregation for threshold purposes is by capital
project. Capital projects when complete are recorded as assets by allocating costs to each
component part.
TRANSPORTATION
Transportation assets include and are segmented by roads, lanes, sidewalks, traffic
intersections, and signage. Aggregation for threshold purposes is by capital project. Capital
projects when complete are recorded as assets by allocating costs to each component part.
TECHNOLOGY/COMMUNICATIONS
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IT infrastructure includes software, hardware, infrastructure, computers, printers, scanners,
photocopiers and the telephone network. This IT infrastructure is capitalized if each
purchase or project meets threshold limits. Computers and printers, scanners, photocopiers,
etc. are capitalized if purchased in volume and the volume exceeds the threshold limit.
VEHICLES, MACHINERY AND EQUIPMENT
Vehicles, machinery and equipment are pooled, segmented at unit level for threshold
purposes.
TCA INVENTORY - OWNERSHIP
Ownership of assets requires safeguarding, maintenance, amortization for replacement and
possibly write-downs. These requirements are addressed in this section.
It is the responsibility of the staff members to ensure capital assets assigned to his or her
custody are maintained and safeguarded.
Amortization is an annual charge to expenditures for the use of a capital asset. The Town
sets amortization rates on a straight line basis based the on number of years in service less
salvage value. The asset categories are amortized as follows:
Asset Category
Amortization of Cost less Savage Value
Land
Not amortized
Land Improvements
Straight line over useful life of each asset unit
Parks Infrastructure
Straight line over useful life of each asset unit
Buildings & Improvements
Straight line over useful life of each asset unit
Construction in Progress
Not amortized
Machinery,
Vehicles
and
Equipment
Straight line over useful life of each asset unit
Technology/Communication
Straight line over useful life of each asset unit
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Infrastructure
(e.g.
water,
wastewater, roads etc.)
Straight line over average useful
life of each segment for cost less salvage
value
All assets are amortized as of January 1st of the year for which the said asset is put into
service. Economic useful life is used for amortization rather than physical useful life.
A write down of assets occurs when reduction in future economic benefit is expected to be
permanent and the value of future economic benefit is less than the TCA's net book value. A
write down should not be reversed. Further information regarding write-downs may be found
in Attachment 1.
TCA INVENTORY - DISPOSAL
Disposal procedures for capital assets are in accordance with the Town's Procurement
Policy. All disposals of TCA's are recorded in the Town's financial statements in accordance
with PSAB 3150.
ACCOUNTING
The Public Sector Accounting Board expectations regarding transition to PSAB 3150 is
provided in PSAB 3150.43 to PSAB 3150.48. PSG-7 Tangible Capital Assets of Local
Governments (Attachment III) provides further guidance on the notes to the Financial
Statements.
Preliminary transition steps are as follows:
i.
Remove Tangible Capital Assets and Investment in Tangible Capital Assets from
the Statement of Financial Position.
ii.
Keep long term debt as a financial liability.
iii.
Add to the Statement of Financial Position, the recently valued, currently held,
tangible capital assets along with related accumulated amortization. The
offsetting account is prior year surplus.
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iv.
Record new additions on the Statement of Financial Position with the offsetting
entry to cash, accounts payable or long term debt. Do not expense the cost of
capital assets.
v.
Record disposals at the time of replacement. Disposals reduce the cost of the
asset, accumulated amortization with the residual recorded as either an expense
or revenue.
vi.
Amortize the assets each year. Budget for amortization.
vii. Write-downs are an adjustment to the cost of the TCA (PSAB 3150.31) and
expense.
viii. Offsetting adjustment for amortization in the budget for the purposes of a
balanced budget is a transfer from equity.
ix.
Budgeting for capital assets will be for the costs expected on the Statement of
Financial Position.
Tangible Capital Assets on the financial statements will result in net capital assets on
the balance sheet and expenditures for depreciation and write-downs on the income
statement.
PRESENTATION AND DISCLOSURE
In total and for each major category of capital assets, the Town will disclose the
following in accordance with CICA Public Sector Guideline 7 (PSG-7):
a.
Cost at the beginning and end of the period;
b.
Additions in the period;
c.
Disposals in the period;
d.
The amount of any write-downs in the period;
e.
The amount of depreciation for the period;
f.
Accumulated amortization at the beginning and end of the period;
g.
Net carrying amount at the beginning and end of the period;
Also in accordance with PSG-7 disclosure will include:
a. The method used to determine the cost of each major category of TCA;
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b. The amortization method used, including amortization period or rate for
each major capital category of TCA;
c. The net book value of TCA's not being amortized because they are under
construction or development or have been removed from service;
d. The nature and amount of contributed TCA's received in the period;
e. The nature and use of tangible capital assets disclosed at nominal value;
f. The nature of the works of art and historical treasures held by the
government ; and
g. The amount of interest included in the cost in the period.
The Tangible Capital Asset Policy for the Town of Rainy River shall be effective
January 1, 2009.
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ATTACHMENT I
ASSET USEFUL LIFE - General Guidelines
ASSET TYPE
ESTIMATED
USEFUL LIFE
Parks Infrastructure
Playground Equipment
20
Washrooms, Concessions, Picnic Shelters
60
Outdoor pools, spray pools
20
Docks
40
Building Structure/sewer lift station wet well
60
Building Improvements
Exterior Envelope
50
HVAC Systems/Generator
20
Roofs
15
Electrical/Plumbing
25
Site works - Asphalt, water and sewer lines, etc.
20
Lift Station pumps/inlet pipes
30
Machinery & Equipment
General Equipment
10
Grounds Equipment and Machinery
10
Heavy Construction Equipment
20
Office Furniture
10
Fire Department turnout gear, SCBA;s
10
Vehicles
Cars and Light Trucks
20
Fire Trucks
20
IT Infrastructure
Hardware
5
Software
10
Telephone system/Photo copiers, fax, radios
10
Infrastructure
Water lines/Hydrants
60
Water valves/services
30
Sewage Lagoon Cells
75
Sewer/Storm Sewer
60
Manholes
40
Drainage
40
Street Lights
30
Roads - base
80
Roads - Gravel
80
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Roads - Asphalt
20
Roads - tar and Chip
10
Sidewalks/curbs
30
Landfill
50
ADOPTION & REVIEW GUIDELINES
Approved by Motion #_10-186___ on _October 12_, 2010
Reviewed/Revised by Res. # 16-055__
Approximate date of next review ________________ _______, 20____
REFERENCES:
POLICY AREA
POLICY NUMBER
Finance
Section F-9
_____________
_____________