05/25/04 - Laserfiche WebLink

Home

FC CASE AMEND CAPITALIZATION THRESHOLD FOR FIXED ASSETS TO $5,000 By: Diana Lund, Finance Officer Background: On November 23, 1999, Ramsey City Council adopted a fixed asset threshold for fixed assets in the amount of $1,000. In the public sector, the term "fixed assets" typically is used to refer to land, buildings, equipment, and improvements other than buildings acquired by a government for use in the provision of goods or services to citizens. Not all fixed assets are required to be reported on a government's balance sheet. Specifically, fixed assets with extremely short useful lives and fixed assets of small ~nonetary value are reported as an "expenditure" or "expense" in the period in which they are acquired. Those fixed assets that are reported on the balance sheet are said to be "capitalized." The monetary criteria used to determine whether a given fixed asset should be reported on the balance sheet is known as the "capitalization threshold." The Government Finance Officers Association recommends that local goverments consider the following guidelines in establishing thresholds for their fixed assets: Fixed assets should be capitalized only if they have an estimated useful life of a least two years following the date of acquisition. Fixed assets' capitalization thresholds should be applied to individual fixed assets rather than to groups of fixed assets (ex: desk, tables). In no case should a government establish a capitalization threshold of less than $1,000 for any individual item. Governments should exercise control over their noncapitalized fixed assets by establishing and maintaining adequate control procedures at the department level. For year ending 2004, The City of Ramsey is required to implement GASB #34 which is a new reporting model of how the City's Comprehensive Annual Financial Report (CAFR) is to be presented. A major component of this model is the reporting of fixed assets. For purposes of this reporting, Cities are establishing/and or updating fixed asset thresholds so that they are not too low such as the $1,000 currently in place at Ramsey. The lowest threshold that cities are using has been $5,000 per fixed asset.