Accurate Records of Fixed Assets
Accurate records should be maintained of the cost and accumulated depreciation of all capital assets including property, plant and equipment.
The acquisition of capital assets should be organized to ensure that no unauthorized acquisitions have been made and that records of each acquisition are accurate, complete, and recorded in the appropriate period.
The physical receipt of all purchased goods should be the responsibility of the designated department.
The receiving department should inspect goods for conformity with specifications on purchase orders.
All capital assets should be identified upon their receipt by the use of a pre-numbered tag obtained from the Finance Department.
The tag should be permanently affixed in a readily visible area.
Record the property number on the tag in the detailed fixed asset ledger.
Record the location of the asset installation in the detailed fixed asset ledger.
Maintain accurate and complete detailed fixed asset ledgers.
Post asset additions, disposals and period depreciation to the detailed ledger.
Reconcile the detailed fixed asset ledger to the general ledger for asset cost and accumulated depreciation annually. Investigate and resolve differences disclosed in the reconciliation.
A Director of Finance should review the results of the reconciliation before any adjustments to the account are recorded. Such review should be evidenced by a signature.
Construction in progress should be capitalized.
No depreciation should be taken on construction in progress.
Upon completion of construction and placement in service, the asset should be removed from construction in progress and entered into the detailed fixed asset ledger in the appropriate classification. If the asset is not an eligible infrastructure capital asset reported under the Modified Approach, depreciation should now be taken on the asset.
Additions to Capital Assets
All additions to capital assets should be properly authorized
Capital assets include property, plant and equipment assets having an estimated useful life of at least two (2) years following the acquisition date
Capital assets should be reported at historical cost. The cost of a capital asset should include capitalized interest and ancillary charges necessary to place the asset into its intended location and condition for use
Items with useful lives less than two (2) years or of small monetary value (less than $5,000 per unit cost) are reported as an expense or expenditure in the period in which they are acquired
Control over non-capitalized capital-type items is maintained by adequate control procedures at the department level
Property, plant and equipment are generally categorized by the following broad asset types:
Asset Type: Estimated Useful Life:
Capital leases Lease term
Mains and extensions 10-65 years
Buildings 10-15 years
Autos and equipment 3-10 years
Furniture and equipment 3-10 years
Record additions of capital assets in the detailed fixed asset sub-ledger
Reconcile the detailed fixed asset sub-ledger to the general ledger.
Investigate and resolve differences found in the reconciliation.
Procedure Coordinator: Director of Finance
Disposal of Fixed Assets
Disposal of capital assets should occur only after proper authorization has been given.
Control over the disposition of property should be maintained not only to preserve the accuracy of the records but also to ensure that assets are safeguarded, improper disposal is avoided, and the best possible terms are received for disposal.
Complete a Disposal Form for all disposals.
The Department head will review the Disposal Form.
Review the Disposal Form to verify the retirement/disposal is properly approved and documented.
Remove the cost from the appropriate asset account; the related accumulated depreciation, including depreciation to date of the disposal; and the profit or loss, adjusted for the cost of removal, should be recorded as an income (gain) or expense (loss) item.
When the disposal is via a trade-in of a similar asset, the acquired asset should be recorded at the book value of the trade-in asset plus any additional cash paid. In no instance should the cost exceed the fair market value for the new asset.
Fully depreciated assets should remain on the property records with the related accumulated depreciation as long as the property is still in use.
Lake Worth City Hall
3805 Adam Grubb
Lake Worth, TX 76135
8:00 am to 5:00 pm
Monday through Friday
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