Page 241 - Saginaw FY19 Annual Budget

CITY OF SAGINAW, TEXAS
CAPITALIZATION POLICY

I. Purpose
To provide a uniform criteria for identifying City expenditures for capitalization, and for the proper asset
classification of capital expenditures, including guidelines for the determination of the economic useful
lives of assets.

II. Policy

A. It is the general policy of the City of Saginaw to identify an expenditure as a capital asset if it meets
all of the following requirements:

1. is City owned
2. costs $5,000 or more
3. has an economic useful life of one or more years
4. is intended to provide productive benefit to the City during its useful life.

B. Additional expenditures on existing assets may be capitalized if the asset’s productive capacity is
significantly improved or the economic useful life of the asset is extended by three or more years.
Replacement assets may be capitalized if they meet the four criteria listed above.

C. Capital items in most cases are new or replacement items with long lives. Expense items are
generally those which are used up in a short time (less than one year) or are expenditures which
maintain an existing asset in good condition, but do not improve it from its original condition.

D. Low value capital items (cost below $5,000) are arbitrarily expensed to reduce the bookkeeping
costs of tracking and depreciating them.

E. For various reasons, some City assets may have a reduction in productive benefit not accounted for
by normal depreciation. Such assets (if not fully depreciated) shall be removed from City asset
accounts or reduced in value, and written off to expense, to the extent that future benefit to the City has
been reduced.

F. Expenditures that do not qualify as capital expenditures, where they can reasonably be forecast,
should be funded by the annual operating budget.

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