7455 - ACCOUNTING SYSTEM FOR FIXED ASSETS

Newark Digital Academy

Bylaws & Policies

7455 - ACCOUNTING SYSTEM FOR FIXED ASSETS
Introduction

The Board recognizes the need to implement required accounting and financial reporting standards promulgated by the Governmental Accounting Standards Board (GASB). Implementation of GASB Statement 34 requires the Academy to properly record and classify capital assets and to depreciate them over their recognized useful lives.

Definition of a Fixed Asset

The Academy defines a fixed asset as tangible property, obtained or controlled as a result of past transactions, events or circumstances, which is to be used in a productive capacity by the Academy and which will benefit the Academy for a period of more than three (3) years.

To qualify for inclusion as a capitalized asset in the Academy's fixed asset system, the following five (5) criteria must be observed:

	A.	The asset must have a cost or dollar value of $1,000 or more.

	B.	The asset must have a useful life exceeding three (3) years or more (based upon reasonable estimates).

	C.	The asset must be land, building, building improvement, or be of a tangible nature (possess physical substance).

	D.	The asset may not lose its identity as part of a larger unit.

	E.	The asset is not a repair part or supply item.

The Academy has determined that assets having a value under $1,000, regardless of their useful life, will not be used for financial reporting purposes. However, assets having a value of less than $1,000 may be entered into the fixed asset inventory system for control purposes only.

Grouping of Assets

It is the policy of the Academy not to capitalize individual items less than the threshold amount of $1,000, even if in the aggregate they are greater than the threshold, unless the assets are only capable of being used together, are connected and are not intended to be dislocated or used individually. In the view of the Academy, the benefit of capitalizing these assets does not outweigh the cost (time of tracking, tagging, and depreciating these assets) and thus will not be capitalized. This policy is retroactive to the inception of the Academy.

Types of Assets to be Included

	A.	Land:

		Land is real property that generally includes both surface and content of the land. Land costs include not only the original contract price but also such related costs as liens assumed, legal and title fees, surveying, filing, grading, drainage, and other cost of preparation for the use intended. Salvage receipts on demolition of an old building or a similar circumstance may reduce the cost of land. Land acquired through forfeiture is capitalized at the total amount of all tax liens and other claims surrendered (such as cost of acquiring ownership and perfecting title.) Land acquired through donation is valued at the appraised fair market value at the date of acquisition. The cost of the appraisal itself should not be capitalized. Land records should include the assessor's parcel number and/or lot, book and tract, as well as an identification of use and location.

	B.	Buildings:

		Buildings consist of structures erected above or below the ground or the purpose of sheltering persons or property. They are designed with a foundation and roof and may or may not have full enclosure. Building costs include construction and purchase cost and the cost of all fixtures permanently attached and made part of the building. For constructed building, costs include contractor payments, in-house labor costs, attorney fees, insurance during construction, architectural fees and the like.

		Building records should, if possible, include a quantitative and qualitative description of each structure segregating, where possible and practical, basic building construction from heating, ventilating, air conditioning, roof, elevators, plumbing, lighting, floor and ceiling cover and built-in for component lifting purposes. These latter assets may be replaced several times during the life of the building shell and therefore, take a shorter useful life estimate. Segregation of these costs ease relieving the building account, when these assets are retired, to avoid pyramiding costs.

	C.	Building Improvements:

		Building improvements consist of additions, improvements and replacements made to existing buildings. Building improvements increase the service potential of a building, they expand area, increase safety, improve climate control or improve mobility within the building. Examples are the addition of a building wing installation of a sprinkler system, central air conditioning, or replacement of an elevator. A building improvement must have significant impact and be a material amount ($1,000 or more per improvement) in order to be capitalized. For this reason, carpeting, partitions, installation of and/or renovation of an office wall structure will generally be expensed. Building improvement costs include construction costs, contractor payments and other cost required to place the improvement in its finished state. Building improvements are capitalized and depreciated separately from buildings.

	D.	Improvements Other than Buildings:

		This group includes all improvements outside a building or improvements to a parcel of land with a cost in excess of $1,000 per improvement.

		Land improvements consist of land attachments with limited lives, including private driveways, walls, fences, parking lots and the like. These are recorded separately from land so they can be depreciated over their useful lives.

		Other improvement in this category include yard and playground areas, miscellaneous structures such as sheds, sign posts, bleachers, drinking fountains, area lighting, etc.

	E.	Furniture, Fixtures, and Equipment:

		Furniture, fixtures, and equipment are defined as personal property that is not attached to land, buildings, or improvements and remains movable. Included in this category are cars, trucks, computers, and the like. Cost associated with direct purchase include shipping costs, related site preparation and installation charges unless these are nominal. Fixed asset records should include location and department codes and identifying descriptions (manufacturer, model, and serial numbers, etc.). Standard descriptions are used when possible.

	F.	Construction in Progress:

		Construction in progress is used to account for expenditures accumulated at the balance sheet date relative to construction of fixed assets. Expenditures include construction cost, contractor payments, interest costs (incurred to the period of construction) and other costs required to finish the project.

Donations of assets can occur in a governmental setting, with assets being acquired as gifts from individuals or organizations. Valuation of these assets should be established based upon the fair market value on the date of the gift.

Types of Assets to be Excluded

Inventories of materials and supplies to be consumed in the normal course of the Academy's operations. These items, if material in amount, are included on the Academy's balance sheet but are not intended to be accounted for on the fixed asset system.

Depreciation

Depreciation is required for the Academy's assets.

Depreciation Method

Unless otherwise noted, all depreciation is calculated using the straight-line method which is the method used by most governmental units.

Useful Lives

Useful lives of fixed assets relate to the life expectancy as used by the specific governmental unit. The Academy has established the following general categories of useful lives for its fixed assets:

A.	Buildings	30-50 years

B.	Building Improvements	10-40 years

C.	Improvements other than Buildings	10-20 years

D.	Furniture, Fixtures, and Equipment	3-20 years

Useful lives are assigned to each asset unit or determined on an average for the group. They are based on actual experience, whenever possible, or engineering evidence or practice if the Academy has no actual experience. They are expressed in terms of the probable total years of service.

Disposals

Academy fixed assets are retired through several means including sale, trade-in, loss by theft, etc. All disposals, by any means, must be reported to the Treasurer's Office.

Pursuant to R.C. 3313.41, an asset to be disposed of by sale which has a current value in excess of $10,000 must be sold at public auction. The Treasurer's office shall be informed of such auctions and shall be provided with a full report and accounting of all assets disposed of for use in updating the fixed asset records. All sale or trade-in of assets, regardless of value, must have prior written approval of the Treasurer.

Adopted 5/29/08