BEING A BY-LAW TO ADOPT A TANGIBLE CAPITAL ASSET POLICY
Passed by Council February 8, 2010
CORPORATION OF THE TOWNSHIP OF AUGUSTA
BY-LAW NUMBER 2811
A BY-LAW TO ADOPT A TANGIBLE CAPITAL ASSET POLICY
WHEREAS Section 9 of the Municipal Act, 2001, as amended, grants a municipality
the capacity, rights, powers and privileges of a natural person for the purpose of
exercising its authority under this or any other Act; and
WHEREAS the Council of the Corporation of the Township of Augusta deems it
necessary to implement a Tangible Capital Asset Policy; and
WHEREAS implementing a Tangible Capital Asset Policy is deemed to be a natural
person power; and
WHEREAS Subsection 5(3) of the Municipal Act requires that all municipal powers,
including natural person powers, are exercised by by-law;
NOW THEREFORE the Council of the Corporation of the Township of Augusta enacts
1. The Tangible Capital Asset Policy for the Corporation of the Township of
Augusta attached as “Schedule A” forming part of this by-law is hereby adopted.
2. This by-law will come into effect on the date of passing.
READ a first and second time this 8th day of February 2010.
READ a third time and passed this 8th day of February 2010.
Signed by Reeve Mel Campbell and Clerk Linda Robinson
Schedule “A” to By-Law 2811
Subject: Tangible Capital Assets Policy
Department: Administration & Finance
Date February 2010
A Tangible Capital Assets (TCA) Policy promotes compliance with the Public Sector
Accounting Board (PSAB) Handbook Section PSAB 3150 (Attachment I). It provides overall
direction for the capitalization of assets, technical guidance in the creation of a tangible
capital assets accounting system and addresses areas of PSAB 3150 that may require
( professional judgement. In addition, a TCA Policy provides a framework in which to make
consistent and sound decisions, plan ahead for future needs and provide public confidence
in accounting and financial reporting processes.
Financial Statements prepared for fiscal the year starting January 1, 2009 will require
compliance with PSAB 3150. Comparative figures for the year 2008 are also required.
All tangible property owned by the Township either through donation or purchase, and which
qualifies as a tangible capital asset is included in the scope of this Policy.
Tangible Capital Assets
In accordance with PSAB 3150, tangible capital assets are non-financial assets having
physical substance that:
i. are held for use in the production or supply of goods or services, for rental to others, for
administrative purposes or for the development, construction, maintenance or repair of
other tangible capital assets;
ii. have useful economic lives extending beyond an accounting period;
iii. are to be used on a continuing basis; and
iv. are not for sale in the ordinary course of operations.
Tangible Capital Assets are recorded at historical cost. Where historical cost information is
not available, valuation approaches such as appraisals, the deflated replacement cost, the
deflated reproduction cost or fair value are to be applied where appropriate.
Cost as defined by PSAB 3150, is the gross amount of consideration given up to acquire,
construct, develop or better a TCA, and includes all costs directly attributable to acquisition,
construction, development or betterment of the TCA, including installing the asset at the
location and in the condition necessary for its intended use. The cost of a contributed TCA,
including a TCA in lieu of a developer charge, is considered to be equal to its fair value at the
date of contribution. Capital grants are not to be netted against the cost of the related TCA.
The cost of a leased TCA is determined in accordance with Public Sector Guidelines PSG-2
(Attachment II), Leased Tangible Capital Assets.
Fair Value is the amount of the consideration that would be agreed upon in an arms length
transaction between knowledgeable, willing parties who are under no compulsion to act. For
assets owned by the Township but not paid for by the Township including contributions, gifts
and donations, valuation may be assessed by fair value.
The level of detail required in the capital asset inventory is a balance between the cost of
data collection, tracking and analysis and the beneficial use of the information gathered. A
category of assets is a grouping of assets of a similar nature or function in the Township’s
operations. The following list of categories and sub-categories shall be used:
Capitalization thresholds are established to determine whether expenditures are to be
capitalized as assets and depreciated or treated as current year expenditures. For financial
reporting purposes thresholds are set fairly high, however, details may be useful for the
Township’s capital asset management program. Therefore, an optimal threshold for each
asset category is a balance between the two.
The Township’s capitalization thresholds are set based on information gathered from various
industry sources and experts combined the consideration of the materiality of the asset
Thresholds apply to capital goods purchased and capital projects constructed with the total
cost of the good or project meeting the capitalization threshold criteria. Long term assets
that do not individually meet threshold limits but do meet threshold limits when aggregated
are to be capitalized.
Further refinement to threshold levels will occur as the Township develops an understanding
of its asset and reporting needs. Improvements are capitalized when they extend the useful
life of the asset.
CLASSIFICATION, AGGREGATION & SEGMENTATION
Land owned by the Township includes parkland, land for Township owned facilities and land
under roads. All land owned by the Township is segmented by each parcel held. Township
parkland and the land for Township facilities and leased facilities is quantified and included in
the Township’s land database. Due to the age of the land under roads, existing Township
land under the roads and sidewalks are considered to have a nominal value of $1.
BUILDINGS & IMPROVEMENTS
Buildings owned by the Township include Township Hall; Township facilities including
community centres; and third party leased properties.
Building improvements include furniture, fixtures and equipment along with interior fit-outs
required to make the building ready for use. Furniture, fixtures, equipment and fit-outs are
capitalized if purchased in volume and the volume exceeds the threshold limit or if the
individual cost of individual items exceed the threshold.
Parks infrastructure includes playground equipment, and fencing. Each asset when
capitalized is separately recorded with an attached useful life.
IT infrastructure includes software, hardware, infrastructure, computers, printers, scanners,
photocopiers and the telephone network. This IT infrastructure is capitalized if each
purchase or project meets threshold limits. Segmentation for the network is by each hub and
each software application. Computers and printers, scanners, photocopiers, etc. are
capitalized if purchased in volume and the volume exceeds the threshold limit.
VEHICLES, MACHINERY AND EQUIPMENT
Vehicles, machinery and equipment are pooled, segmented at unit level for threshold
Transportation assets include and are segmented by roads, lanes, traffic intersections, street
lights, signage, and structures. Structures include bridges and retaining walls. Aggregation
for threshold purposes is by capital project. Capital projects when complete are recorded as
assets by allocating costs to each component part.
TCA INVENTORY – OWNERSHIP
Ownership of assets requires safeguarding, maintenance, amortization for replacement and
possibly write-downs. These requirements are addressed in this section.
It is the responsibility of the Area Manager and staff members to ensure capital assets
assigned to his or her custody are maintained and safeguarded.
Amortization is an annual charge to expenditures for the use of a capital asset. The
Township sets amortization rates on a straight line basis based the on number of years in
service less salvage value. The asset categories are amortized as follows:
Amortization is calculated on an annual basis starting with the year the asset is put into
service. Economic useful life is used for amortization rather than physical useful life.
A write down of assets occurs when reduction in future economic benefit is expected to be
permanent and the value of future economic benefit is less than the TCA’s net book value. A
write down should not be reversed. Further information regarding write-downs may be found
in Attachment 1.
TCA INVENTORY – DISPOSAL
Disposal procedures for capital assets are in accordance with the Township’s Procurement
Policy. All disposals of TCA’s are recorded in the Township’s financial statements in
accordance with PSAB 3150.
The Public Sector Accounting Board expectations regarding transition to PSAB 3150 is
provided in PSAB 3150.43 to PSAB 3150.48. PSG-7 Tangible Capital Assets of Local
Governments provides further guidance on the notes to the Financial Statements.
Preliminary transition steps are as follows:
i. Remove Tangible Capital Assets and Investment in Tangible Capital Assets from
the Statement of Financial Position.
ii. Keep long term debt as a financial liability.
iii. Add to the Statement of Financial Position, the recently valued, currently held,
tangible capital assets along with related accumulated amortization. The
offsetting account is prior year surplus.
iv. Record new additions on the Statement of Financial Position with the offsetting
entry to cash, accounts payable or long term debt. Do not expense the cost of
v. Record disposals at the time of replacement. Disposals reduce the cost of the
asset, accumulated amortization with the residual recorded as either an expense
vi. Amortize the assets each year. Budget for amortization.
vii. Write-downs are an adjustment to the cost of the TCA (PSAB 3150.31) and
viii. Offsetting adjustment for amortization in the budget for the purposes of a
balanced budget is a transfer from equity.
ix. Budgeting for capital assets will be for the costs expected on the Statement of
Tangible Capital Assets on the financial statements will result in net capital assets on the
balance sheet and expenditures for depreciation and write-downs on the income statement.
PRESENTATION AND DISCLOSURE
In total and for each major category of capital assets, the Township will disclose the following
in accordance with CICA Public Sector Guideline 7 (PSG-7):
a. Cost at the beginning and end of the period;
b. Additions in the period;
c. Disposals in the period;
d. The amount of any write-downs in the period;
e. The amount of depreciation for the period;
f. Accumulated amortization at the beginning and end of the period;
g. Net carrying amount at the beginning and end of the period;
Also in accordance with PSG-7 disclosure will include:
a. The method used to determine the cost of each major category of TCA;
b. The amortization method used, including amortization period or rate for each major
capital category of TCA;
c. The net book value of TCA’s not being amortized because they are under
construction or development or have been removed from service;
d. The nature and amount of contributed TCA’s received in the period;
e. The nature and use of tangible capital assets disclosed at nominal value;
f. The nature of the works of art and historical treasures held by the Township; and
g. The amount of interest included in the cost in the period.
ASSET USEFUL LIFE — General Guidelines