No. 622 SHARPSVILLE AREA SCHOOL DISTRICT SECTION: FINANCES TITLE: GASB STATEMENT 34 ADOPTED: January 22, 2008 REVISED: 622. GASB STATEMENT 34 1. Purpose SC 613 The Board recognizes the need to implement the required accounting and financial reporting standards stipulated by the Pennsylvania Department of Education. The primary objectives of implementing the GASB Statement 34 are to assure compliance with state requirements, and properly account for both the financial and economic resources of the district. 2. Authority SC 218 3. Delegation of Responsibility Participation of the school district in any such activity shall be in accordance with Board policy. The responsibility to coordinate the compilation and preparation of all information necessary to implement this policy is delegated to the Superintendent or designee. 4. Guidelines Capitalized Assets - A capitalized asset shall be any asset acquired, donated, or purchased by the district that has a useful life of longer than one (1) year and meets a specific dollar threshold. Value Of Assets - All capitalized assets shall be recorded at historical cost at acquisition date or estimated cost. Depreciation - Depreciation shall be based on the straight-line method of depreciation over the useful life of each depreciable asset or group of assets. Dollar Threshold - A dollar threshold for each asset shall be set at an appropriate level. Management should periodically review these levels with assistance from the local independent auditor and make any modifications necessary without prior approval of the Board. Estimated Useful Life - The estimated useful life will be the estimated number of months or years that an asset will be able to be used for the purpose for which it was purchased. The following standard useful life table shall be used by the district to estimate useful lives of capital assets. However, property management practices, asset usage and other variables such as weather may require adjusting. Page 1 of 6
622. GASB STATEMENT 34 - Pg. 2 Asset Class Examples Estimated Useful Life in Years Land N/A Site Improvements Paving, flagpoles, retaining walls, sidewalks, fencing, outdoor lighting 20 School Buildings 50 Portable Classrooms 25 HVAC Systems Heating, ventilation and air conditioning systems 20 Roofing 20 Interior Construction 25 Carpet Replacement 7 Electrical/Plumbing 30 Sprinkler/Fire System Fire suppression systems 25 Outdoor Equipment Playground, radio towers, fuel tanks, pumps 20 Machinery & Tools Shop & maintenance equipment, tools 15 Kitchen Equipment Appliances 15 Custodial Equipment Floor scrubbers, vacuums, other 15 Science & Engineering Lab equipment, scientific apparatus 10 Furniture/Accessories Classroom and office furniture 20 Business Machines Fax, duplication & printing equipment 10 Copiers 5 Communications Equip. Mobile, portable radios, noncomputerized 10 Computer Hardware PC s, printers, network hardware 5 Computer Software Instructional, other short-term 5 to 10 Computer Software Administrative or long-term 10 to 20 Audio Visual Equip. Projectors, cameras (still and digital) 10 Athletic Equipment Gymnastic, football, weight machines, wrestling mats 10 Musical Instruments Pianos, string, brass, percussion 10 Library Books Collections 5 to 7 Licensed Vehicles Buses, other on-road vehicles 8 Contractors Equipment Major off-road vehicles, front-end loaders, large tractors, mobile air compressor Grounds Equipment Mowers, tractors, attachments 15 10 Page 2 of 6
622. GASB STATEMENT 34 - Pg. 3 The district shall conduct an inventory of all capital assets. Each inventory record shall include: description, year of acquisition, method of acquisition (i.e. purchase, donation, etc.) funding source, cost or estimated cost, salvage value and estimated useful life. The inventory record will also need to identify the function(s) that use the asset and location of the asset. Land is to be capitalized but not depreciated. It is recorded at historical cost and remains at the cost until disposal. If there is a gain or loss on the sale of the land, it is reported as a special item in the statement of activities. Land improvements include items such as excavation, non-infrastructure utility installation, driveways, sidewalks, parking lots, flagpoles, retaining walls, fencing, outdoor lighting, and other nonbuilding improvements intended to make the land ready for its intended purpose. Land improvements can be further categorized as nonexhaustible and exhaustible. 1. Nonexhaustible Expenditures for improvements that do not require maintenance or replacement, expenditures to bring land into condition to commence erection of structures, expenditures for improvements not identified with structures, and expenditures for land improvements that do not deteriorate with use or passage of time are additions to the cost of land and are generally not exhaustible and, therefore, not depreciable. 2. Exhaustible Other improvements that are part of a site, such as parking lots, landscaping and fencing are usually exhaustible and are, therefore, depreciable. Depreciation of site improvements is necessary if the improvement is exhaustible. Buildings shall be recorded at either their acquisition cost or construction cost. The cost of new construction shall be carefully evaluated. Usually projects consist of major components such as land, land improvements, building constructions, (including professional fees and permits), furniture, fixtures and equipment. In addition, buildings include components (i.e. roof, air conditioning system, etc.) that should be recorded separately when significant because these building components have different useful lives. The value of each component needs to be determined and placed within its own category. Building improvements that extend the useful life shall be capitalized. Construction in progress shall be capitalized and not depreciated. It shall be reported with land and other nondepreciating assets at the government-wide level. Unspent debt proceeds from capital assets related debt shall be reported in the net assets section of the Statement of Net Assets as restricted for capital projects. Page 3 of 6
622. GASB STATEMENT 34 - Pg. 4 Assets such as furniture, machinery and equipment (that meet threshold levels) shall be identified and inventoried. Some assets, individually, may fall below the capitalization threshold but may be purchased in large quantities by the school entity. Examples include computer systems, software, audio-visual equipment, athletic equipment, musical instruments, outdoor equipment, library books, classroom textbooks, buildings and grounds equipment and furniture fixtures. School entities shall aggregate such assets and consider the materiality and significance of them, and if material or significant, capitalize such items either individually or in the aggregate. Vehicles shall be identified, inventoried, and if applicable, depreciated. Works of art and historical treasures shall be recorded at historical costs. Depreciation is not required for collections or works of art that are inexhaustible. The district does not need to capitalize every asset with a useful life greater than one (1) year. To do so is an unnecessary burden and will not materially affect financial results. The capitalization threshold shall be set at a level that will capture at least eighty percent (80%) of all fixed assets. The district shall use the following capitalization threshold. Asset Class Capitalize and Depreciate Land Capitalize Only Land Improvements $5,000 Building $5,000 Building Improvements $5,000 Construction in Progress Capitalize Only Machinery and Equipment $5,000 Vehicle $5,000 Portable Classroom $5,000 Grouped Depreciable Capital Assets $5,000 Leasehold Improvements $5,000 In order to associate debt with acquired assets and to avoid net asset deficits any asset that has been acquired with debt proceeds shall be capitalized regardless of the cost of the asset. The asset life of these assets shall be considered relative to the time of the respective debt amortizations. When possible, the structure shell of a building shall be segregated from the mechanical, roofing, electrical, plumbing, cafeteria and built-ins. These components may be replaced several times during the life of the structure shell. Segregation of these costs will ease accountability for replacing or improving the components parts and avoid pyramiding the asset valuation. Page 4 of 6
622. GASB STATEMENT 34 - Pg. 5 To be considered a building improvement, the improvement must have a significant impact and meet the capitalization threshold included in this policy. For example, partitioning, lighting, flooring, and routine maintenance will generally be expenses. Infrastructure assets are long-lived capital assets that normally can be preserved for a significantly greater number of years than most capital assets. Infrastructure assets are normally stationary in nature such as roads and bridges. Buildings, except those that are an ancillary part of a network of infrastructure assets, should not be considered infrastructure assets. Other examples of noninfrastructure assets that are incidental to a school entity s property include: fencing, retaining walls irrigation systems, athletic courts, fields and tracks, private use sewer facilities and water lines, area lighting, drivers, parking lots, sidewalks, curbs and gutters. The determination of major infrastructure assets shall be at the network or subsystem level and shall be based on these criteria: 1. The cost or estimated cost of the subsystem is expected to be at least five percent (5%) of the total cost of all general capital assets reported in the first fiscal year ending after June 15, 1999. 2. The cost or estimated cost of the network is expected to be at least ten percent (10%) of the total cost of all general capital assets reported in the first fiscal year ending after June 15, 1999. Reporting on nonmajor networks is encouraged but not required. For group asset depreciation purposes, the estimated useful life of the group may be based on the weighted average or simple average of the useful life of individual items or on an assessment of the life of the group as a whole. Periodically, the school entity shall review the estimated life of groups of assets and adjust the remaining depreciation life of the group. Assets that fall below the capitalization threshold for GASB Statement Number 34 reporting purposes may still be significant for insurance, warranty service, and obsolescence or replacement policy tracking purposes. The district will record and maintain these non-gasb Statement Number 34 asset inventory items valued between $500.00 and $5,000.00 in subsidiary ledgers. A physical inventory of consumable supplies will take place every three (3) years. Page 5 of 6
622. GASB STATEMENT 34 - Pg. 6 References: School Code 24 P.S. Sec. 218, 613 Governmental Accounting Standards Board, Statement No. 34 Page 6 of 6