HomeMy WebLinkAboutNC Comprehensive Report (Finance) (37)CITY OF NATIONAL CITY
Notes to the Basic Financial Statements
(Continued)
(1) Summary of Significant Accounting Policies, (Continued)
Capital Assets
The City's assets are capitalized at historical cost or estimated historical cost.
City policy has set the capitalization threshold for reporting general capital assets
at $5,000 (including infrastructure assets). Gifts or contributions of capital assets
are recorded at fair market value when received. Depreciation is recorded on a
straight-line basis over the useful lives of the assets as follows:
Buildings and Improvements 10 -50 years
Machinery and Equipment 2 -20 years
Infrastructure 25 -75 years
In June 1999, the GASB issued Statement No. 34 which requires the inclusion of
infrastructure capital assets in local governments' basic financial statements. In
accordance with Statement No. 34, the City has included the value of all
infrastructures in the Basic Financial Statements.
The City defines infrastructure as the basic physical assets that allow the City to
function. The assets include the streets, water purification and distribution
system, sewer collection and treatment system, parks and recreation, lands and
improvement system, storm water conveyance system, and buildings combined
with the site amenities such as parking and landscaped areas used by the City in
the conduct of its business. Each major infrastructure system can be divided into
subsystems. For example, the street system can be subdivided into pavement,
curb and gutters, sidewalks, medians, streetlights, traffic control devices (signs,
signals and pavement markings), landscaping and land.
These subsystems were not delineated in the basic financial statements. The
appropriate operating department maintains information regarding the
subsystems.
Interest accrued during capital assets construction, if any, is capitalized for the
business -type and proprietary funds as part of the asset cost.
For all infrastructure systems, the City elected to use the Basic Approach as
defined by GASB Statement No. 34 for infrastructure reporting. The City
commissioned an appraisal of City owned infrastructure and property as of
June 30, 2003. This appraisal determined the estimated historical cost, which is
defined as the actual cost to acquire new property in accordance with market
prices at the time of first construction/acquisition. Estimated historical costs were
developed in one of three ways: (1) historical records; (2) standard unit costs
appropriate for the construction/acquisition date; or (3) present cost indexed by a
reciprocal factor of the price increase from the construction/acquisition date to the
current date. The accumulated depreciation, defined as the total depreciation
from the date of construction/acquisition to the current date on a straight line,
29