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    Cambria Community Services District: Capitalization Policy

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    rrr44
    The capitalization policy provides guidelines for capitalizing purchases as assets that are depreciated over time versus expensing them as operating costs. Purchases of $5,000 or more that last two years or more are capitalized as fixed assets. Software packages and infrastructure costs of $25,000 or more that extend asset life are also capitalized. Work in progress projects are capitalized regardless of individual costs. Sensitive items under $5,000 are inventoried by department. Assets are tracked in an Excel spreadsheet.

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    Cambria Community Services District: Capitalization Policy

    Uploaded by

    rrr44
    221 views2 pages
    The capitalization policy provides guidelines for capitalizing purchases as assets that are depreciated over time versus expensing them as operating costs. Purchases of $5,000 or more that last two years or more are capitalized as fixed assets. Software packages and infrastructure costs of $25,000 or more that extend asset life are also capitalized. Work in progress projects are capitalized regardless of individual costs. Sensitive items under $5,000 are inventoried by department. Assets are tracked in an Excel spreadsheet.

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    Capitalization Policy 2004 01 22

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    The capitalization policy provides guidelines for capitalizing purchases as assets that are depreciated over time versus expensing them as operating costs. Purchases of $5,000 or more that last two years or more are capitalized as fixed assets. Software packages and infrastructure costs of $25,000 or more that extend asset life are also capitalized. Work in progress projects are capitalized regardless of individual costs. Sensitive items under $5,000 are inventoried by department. Assets are tracked in an Excel spreadsheet.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    221 views2 pages

    Cambria Community Services District: Capitalization Policy

    Uploaded by

    rrr44
    The capitalization policy provides guidelines for capitalizing purchases as assets that are depreciated over time versus expensing them as operating costs. Purchases of $5,000 or more that last two years or more are capitalized as fixed assets. Software packages and infrastructure costs of $25,000 or more that extend asset life are also capitalized. Work in progress projects are capitalized regardless of individual costs. Sensitive items under $5,000 are inventoried by department. Assets are tracked in an Excel spreadsheet.

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    © All Rights Reserved
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    of 2

    CAMBRIA COMMUNITY SERVICES DISTRICT

    P.O. Box 65 • Cambria, CA 93428 • Telephone: (805) 927-6223 • Fax: (805) 927-5584

    CAPITALIZATION POLICY

    PURPOSE
    This capitalization policy provides guidelines for whether a purchase will be capitalized as an asset
    and depreciated, or expensed as an operating expenditure.

    DEFINITION
    Capitalization is the process by which a purchase is recorded as an asset in the accounting records
    that then becomes subject to depreciation over a determined useful life.

    The following guidelines dictate whether a purchase will be set up as an asset and depreciated, or
    included in a department’s operating budget as an operating expense.

    A. FIXED ASSETS

    1. A single item purchased that costs $5,000 or more and has a useful life of two (2) years or
    more is a fixed asset.

    Compare with a purchase made of similar items that individually cost less than $5,000,
    however, the aggregate purchase is over $5.000; this purchase is outside the capitalization
    policy. For example, the purchase of five new computer setups at $1,200 each, total purchase
    = $6,000.00, is outside the policy and expensed.

    2 The total cost of the item to include freight, sales tax and installation. It will not include District
    staff time and expense involved in the purchase and operation.

    B. SOFTWARE PACKAGES

    This refers to programs developed in house, off-the-shelf packages, or software designed by an


    outside consultant.

    1. Follow the same criteria as Fixed Assets and will be amortized over a time span of four (4)
    years.

    2. Enhancements or upgrades to existing software will be capitalized if the original installation


    was capitalized.

    ADMIN:Policy&Procedure\Capitalization Policy 1/22/04

    1
    C. EXISTING INFRASTRUCTURE

    1. A purchase that costs $25,000.00 or more and either adds to the useful life of the asset
    repaired or enables the repaired asset to live its intended useful life. The judgment of Water
    and Wastewater personnel would be used to determine useful life extension.

    2. Purchase cost to include taxes, freight and installation. Cost also includes the services of a
    licensed professional needed to acquire or install.

    For example, a generator part costs $15,000 and related acquisition and installation costs
    push the cost over $25,000. It falls within this policy.

    D. WIP ( WORK IN PROGRESS)

    These are projects in process of becoming operational infrastructure components. The project is not
    at the point where it contributes a benefit to the District.

    1. A general rule is any cost associated with the project regardless of cost.

    2. The exception to the general rule is a cost under $50 per invoice. Examples would be
    sporadic printing, postage, or travel costs.

    3. Any professional service fee regardless of cost is included in the project cost.

    4. Project lead person determines the moment the project is operational

    E. SENSITIVE ITEMS UNDER $5,000

    Examples are as follows: Computers and computer accessories, laptops, field tools, office equipment
    (copy and fax machines), and office furniture. These items generally are less than $5,000 per item.
    When purchased they will be recorded and inventoried by department and position.

    F. TRACKING

    The District’s method of tracking assets is an EXCEL spreadsheet. Copies of the invoice and check
    voucher will be made for backup when the payment is processed.

    ADMIN:Policy&Procedure\Capitalization Policy 1/22/04

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