THE CHIEF EXECUTIVE OFFICER RECOMMENDS THE FOLLOWING:
That the Board adopt a new Accounting and Financial Reporting for Capital Assets Policy.
The “Policy on Capital Assets” defines requirements for accounting for capital assets and expands upon the “Policy on Asset Management” to identify capital asset categories, capitalization thresholds, useful lives, in-service dates, and depreciation methods.
This policy covers all assets purchased, constructed or donated that meet or exceed the established capitalization thresholds and useful lives as defined in Section II B. Capitalization Thresholds and Useful Lives.
This policy applies to all CPS organizational units, including central office departments, network offices, and schools. Adherence to this policy is necessary to comply with federal and state regulations, governmental accounting standards, and to maintain adequate internal control over financial reporting and accounting for capital assets. In addition, Illinois Administrative Code Title 23 Part 100 Section 100.60 (23 IL 100.60.a) requires each school board to adopt a capitalization threshold in order to properly account for capital assets. Finally, proper accounting for capital assets is necessary in order to comply with generally accepted accounting principles as promulgated by Government Accounting Standards Board (GASB) Statements 34, 42, 51, 62, etc. and subsequent amendments.
I. Capital Asset Definitions
Capital assets are real or personal property that have a value equal to or greater than the capitalization threshold for the particular classification of the asset and have an estimated life of greater than a year.
Classification of Capital Assets
Assets purchased, constructed or donated that meet or exceed the established capitalization thresholds or minimum reporting requirements must be uniformly classified. CPS records assets in the following categories:
- Building improvements
- Leasehold improvements
- Personal property (including equipment and furniture)
- Works of art and historical treasures
- Intangible assets
- Construction in progress
“Land” is the surface of the earth, which can be used to support structures and may be used to grow crops, grass, shrubs, and trees. Land is characterized as having an unlimited life.
“Buildings” are structures that are permanently attached to the land, have a roof, are partially or completely enclosed by walls, and are not intended to be transportable or moveable.
“Building improvements” are capital events that materially extend the useful life of a building or increase the value of a building by at least 25 percent of the original life period or cost, or both. For a replacement to a portion of a building to be capitalized, it must be part of a major repair or rehabilitation project, increase the value and/or useful life of the building, and be of significantly improved quality and higher value compared to the replaced portion. Replacement or restoration to original utility level is not capitalized.
“Leasehold improvements” are improvements made to existing structures by the lessee, who has the right to use these leasehold improvements over the term of the lease. These improvements will revert to the lessor at the expiration of the lease. Moveable equipment or office furniture that is not attached to the leased property is not considered a leasehold improvement.
“Personal property” is any movable tangible asset used for operations, the benefits of which extend beyond a year from the date acquired and rendered into service. Improvements or additions to existing personal property that constitute a capital outlay or increase the value or life of the asset by 25 percent of the original cost or life will be capitalized as a betterment and recorded as an addition of value to the existing asset. Note: Costs of extended warranties and/or maintenance agreements, which can be separately identified from the cost of the equipment, will not be capitalized.
“Works of art and historical treasures” are collections or individual items of significance which are not held for financial gain, but rather for public exhibition, education or research in furtherance of public service.
“Intangible assets” are assets that have these three characteristics: lack physical (tangible) substance, nonfinancial in nature, and initial useful life that is greater than one reporting period (see GASB 51). Intangible capital assets include:
- Major computer system software – Any trademarked software package that is purchased or donated which comprises or adds to the useful life of the legacy database systems, the Oracle™ database system, or the Peoplesoft database system.
- Minor computer system software – Any trademarked software package that is purchased or donated, or software that is internally developed to create new systems, that is not classified as Major Computer System Software.
“Construction in progress” is the economic construction activity status of assets (buildings, building improvements, software, etc) which are substantially incomplete.
|Legal References||Illinois Administrative Code Title 23 Part 100 Section 100.60 (23 IL 100.60.a)|