Capital Assets Policy and Procedures
A capital asset is a tangible asset of the municipality that costs $1,000 or more and has an estimated useful life extending beyond one year. Examples include land, buildings and improvements, and equipment used in the operations of the town. Also, capital assets include the infrastructure assets (water system, sewer system, etc.) of the town.
Louisiana Revised Statute 24:515.B.1 requires the town to maintain records of its capital assets. The department heads are responsible for recording, tagging (for identification purposes), and coordinating the annual inventory of all capital assets. The listing of capital assets is to be updated each year for assets acquired and disposed. Failure to identify and periodically account for municipality assets/property exposes the town to possible loss, theft, and misuse of its assets. Any missing assets should be addressed and appropriately resolved, including notifying the district attorney and Legislative Auditor.
Capital assets are reported in the town’s enterprise financial statements at cost (including interest and freight, if any). However, capital assets received as donations are reported at their estimated fair market value at the time of donation.
Except for land which is not depreciated, capital assets are depreciated over their estimated useful lives using the straight-line method of depreciation. The various asset classes are assigned the following estimated useful lives:
|Asset Class||Estimated Useful Life|
|Building Improvements||20 years|
|Machinery and Equipment||5 years|
|Office Equipment||7 years|
|Water System||40 years|
|Sewer System||40 years|
Capital Asset Additions
- The department heads are to review supporting documentation (e.g., purchase order, invoice, etc.) to record the asset information on the capital asset listing. Information recorded should include the asset description, date of acquisition, location, department, cost (or fair value if donated), salvage value.
Capital Asset Deletions/Disposals
- During the year, the department heads are to notify the mayor and clerk when a capital asset is no longer useful in operations and thus available for disposal.
- The mayor is to consult with legal counsel to ensure compliance with state laws that pertain to the disposal (e.g., sell, exchange, etc.) of town property/assets.
- All disposal related documentation (e.g., council resolutions, appraisals, advertisements, bids received, etc.) is to be maintained by the clerk.
- The department head is to identify the asset on the listing and document its disposal (e.g., date, proceeds, etc.).