capital assets and infrastructure for presentation

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Why are we here?To help you identify your capital assets and infrastructureTo show you how value your capital assets and infrastructureTo show you how to depreciate your capital assets and infrastructure

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How do we identify our capital assets and infrastructure?

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What are Capital Assets?Capital Assets are assets that have a useful life greater than one yearInfrastructure is considered a capital asset but is required to be reported separately and will be discussed separately

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Capital Assets ExamplesLandBuildingsVehiclesEquipmentAll other tangible or intangible assets used in operations and with initial lives extending beyond a single reporting period

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Infrastructure Asset Examples

RoadsBridgesTunnelsDrainage systemsWater and sewer systemsDamsLighting Systems

Exhibit 1 - DLG Policy Manual Fixed Asset Documentation

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Sources of Capital Assets Data

Always start with Internal Sources, such as: Insurance Policies DLG Policy Manual Physical Property and Real

Estate Records Bond Issue Documents County Treasurer Property Valuation Administrator Fiscal Court Orders and Minutes Building Commissions

Exhibit 2 - Building Inventory Exhibit 3 - Vehicle Inventory Exhibit 4 - Equipment Inventory

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Sources of Capital Assets Data

If more than one source is available for a particular group of assets, use both sources for comparability purposes to ensure capture of all applicable assetsFor example - Buildings

PVA Exempt Properties Listing Insurance Policy for County Properties (Underwriting

Detail Report) Building Commissions Deeds – Property Transfers Fiscal Court Orders (for purchase or renovation)

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Sources of Infrastructure Data

Internal Sources: Road Superintendent County Treasurer Bond Issue Documents Fiscal Court Orders and Minutes

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Sources of Infrastructure Data

External Sources: KY Transportation Cabinet

Department of Highways (502) 564-3730

Public Service Commission Engineering Division (502) 564-3940

KY Infrastructure Authority (502) 564-2924

Exhibit 10 - Ky County Bridge Listing 10

Additional Sources for Bridges

Kentucky Transportation Cabinet has all the bridges listed for all the counties in the state Bridge Inventory

Division of Operations Ken Watson 502-564-4556 Bridge inventory includes year of construction

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How do we value our capital assets and infrastructure?

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Establish a Capitalization Policy

Before you value your assets, the Fiscal Court needs to establish a capitalization policy This sets an amount for reporting capital assets on

the financial statements Keeps the bookkeeper from being overburdened by

tracking immaterial assets for reporting purposes You will still need to tag and track inventory for internal

control purposes The goal is to capture the material amounts or

items of your inventory

Exhibit 2 - Land and Building Inventory Exhibit 3 - Vehicle Inventory Exhibit 4 - Equipment Inventory

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Capitalization ThresholdsExample: Equipment Threshold - $5000 Purchase of 30 computers - $1500 each =

Total $45,000 Individually may not be significant,

however, cumulatively may be material May need to consider combining assets into

groups

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Historical CostIf you know the actual historical cost of the asset, use it! Historical cost is original cost or purchase

price of the asset. Use the fair market value of donated assets

at the time of the donation. Plus any installation expenses, such as:

Computer Network Installation

Exhibit 6 - Building Cost Construction Index

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Estimating Historical CostEstimate the construction cost for 2002 and deflate that cost to the year of constructionYou can use the Road Segment Program to help you make the determination for infrastructureThis will count as your historical cost estimate (BEST GUESS ESTIMATE!)

Exhibit 6 - Building Cost Construction Index

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Historical Costs for BuildingsBuilding constructed in 1984 with no available construction cost recordsEstimate the construction cost of what it would cost to build todayDeflate back to the year of construction using a Building Cost Construction Index

2002 Construction Cost $4,000,000Construction Cost Index 2417/3583 = 67%Construction Cost Today x Deflation Rate $4,000,000 x 67%1984 Historical Cost $2,680,000

Exhibit 7 - Kentucky Transportation Center Newsletter

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Historical Cost for Infrastructure

If you have the original cost records, use the actual cost of the road or bridge as historical cost.Estimate what it would cost today to build the same road or bridgeDeflate the construction cost back to the year built using the infrastructure construction price index


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How to calculate historical cost

14 miles of 20 ft. wide paved road built in 19822001 Cost

14 miles x 5,280 feet (1 mile) = 73,920 Linear Feet 73,290 LF x $55/LF = $4,065,600

1982 Cost $4,065,600 x 59% (1982 index at 88.5*) = $2,398,704 $2,398,704 is your Historical Cost

*88.5 index is 59% of the 2001 Construction Cost Index at 151.2


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Establishing Rural Road/Street System Values*

*Kentucky Transportation Center

Roads.mde

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How do we calculate depreciation on your capital assets and infrastructure?

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Five elements must be known to calculate depreciation

Date the asset was placed in service Historical Cost (or fair market value for

donated items) Estimated useful life Salvage value (if any) Depreciation method

Straight-line Depreciation

Exhibit 5 - Useful Life Table 22

Capital Asset Useful LivesMost capital assets have an identifiable useful life and can be depreciated over that life Your packet includes examples of Suggested Useful Lives These are only estimates and can be

modified for assets with a particular usage to fit your situation

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Capital Asset Salvage ValueThe estimated value of the asset at the end of its useful life


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Infrastructure Salvage ValueSalvage Value Estimates 20% of construction costs for paved

roads/streets and bridges 10% of construction costs for unpaved roads

and sidewalks Salvage value for infrastructure would

include the road bed which would not be replaced during resurfacing

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Depreciation ApproachGeneral straight-line depreciation to the original book valueProvides accounting information onlyCost of AssetLess:Salvage ValueDepreciable Cost

Divided by: Useful LifeDepreciation Expense for each year

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How to use the Straight-Line Depreciation Method

$21,000 Ford F150 Useful Life of 5 years Placed in service July 2000 $1000 Salvage Value Straight-line Depreciation $4,000 per year depreciation

(Cost – Salvage Value) divided by Useful Life = Depreciation Cost per year

($21,000 – $1000) / 5 years = $4,000 Annual DepreciationAge of Asset x Annual Depreciation = Accumulated Depreciation

2 years x $4000 = $8000 Accumulated DepreciationCost – Accumulated Depreciation = Asset Value at June 30, 2002

$21,000 - $8,000 = $13,000 Asset Value at June 30, 2002

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Accumulated DepreciationTotal depreciation expense from acquisition thru current yearAnnual Depreciation Expense x Number of Years (thru June 30) = Accumulated Depreciation

Historical CostLess: Accumulated Depreciation

Current Asset Value

Exhibit 8 - Road Segment Program Example Exhibit 9 - Road Segment Report (District One) Exhibit 10 - Road Segment Report (Bridges)

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Calculating Depreciation on Infrastructure

Roads.mde

*Kentucky Transportation Center

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Who does this apply to?Phase III Governments NOT required to report infrastructure

acquired or constructed prior to July 1, 2003 Only required to report newly acquired

infrastructure after July 1, 2003 Phase III Governments are strongly

encouraged to retroactively report infrastructure acquired prior to July 1, 2003 – especially if there is related debt reported in the financial statements

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Who does this apply to?Phase II Governments All infrastructure acquired or constructed

after June 30, 2002 must be reported

Have 4 additional years to report retroactive infrastructure assets acquired between June 30, 1980 and June 30, 2002

Reporting infrastructure assets acquired or constructed prior to June 30, 1980 is optional

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Kentucky Transportation Center

Website (www.ktc.uky.edu)Has done extensive work in calculating average useful livesHas created the Road Segment Program for calculating depreciationProvided in THE LINK newsletter the Price Index for Highway ConstructionPatsy Anderson, Manager, Kentucky Technology Transfer Program

1-800-432-0719

http://www.ktc.uky.edu/

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Helpful WebsitesAPA Website (www.kyauditor.net) GASB 34

E-mail link to GASB 34 hotline Frequently Asked Questions from Local Officials Training Materials Regular updates for new information Useful Links

GASB Website (www.gasb.org)