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Purpose/Rationale

· Clarify the assets to which this policy applies;

· Clarify responsibility and safeguarding measures for all assets;

· Clarify the treatment and responsibility for the disposal or redeployment of assets;

· Determine which assets are to be capitalized in accordance with generally accepted accounting principles;

· Determine the appropriate valuation of the capitalized asset;

· Provide the appropriate period of amortization of that capitalized asset over its estimated useful life, and;

· Provide a basis for insurance coverage and the external reporting of capitalized costs.

Scope/Limits

This policy applies to all Library branches and departments and includes, but is not limited to, the following assets: building improvements, administrative equipment (office, audio visual, maintenance and communication) and furnishings (furniture and fixtures, including shelving), computers, software, vehicles, and library books, periodicals and other collection materials.

Definitions

"Maintenance" costs - A term used in the Library Operating Agreement to describe a type of expenditure that the Library is to include in its annual operating budget. Some of these costs may be capital in nature in accordance with generally accepted accounting principles, if the cost incurred enhances the service potential of a capital asset (i.e. a building improvement).

Responsibilities

1. It is the responsibility of the Library to take appropriate and reasonable measures to identify, safeguard, track and record all capital and non-capital assets.

2. The Finance department is responsible for the implementation of this policy, advising on the appropriateness of a capital or non-capital asset for generally accepted accounting purposes and for educating and training on all other matters relating to this document and related procedures.

3. Branch and/or departmental unit heads are responsible for the implementation of this policy to the extent that they acquire and/or are in the custody of capital and non-capital assets. It is further the responsibility of the branch and/or departmental unit head to share this document and related procedures with all unit personnel who are involved in the purchasing, identification, recording, care and custody of capital and non-capital assets.

4. All persons having responsibility for the use and care of capital and non-capital assets are to ensure that reasonable safeguarding measures are in place at all locations where these assets reside to prevent damage to or the loss of such assets. When disposing of an asset the Surplus Asset Disposal Form is to be completed as required and in accordance with the Surplus Asset/Redeployment Disposal Policy.

5. The Finance department will be responsible for recording in accordance with generally accepted accounting principles the addition of all capital assets, donated assets (including works of art), disposal, amortization and the grants and cash donations received to offset the costs of capital assets.

6. The Finance department will be responsible for reviewing the tax implications in the acquisition, disposal and redeployment of capital and non-capital assets.

Budgeting and Reporting

1. Capital assets are charged to expenditure on acquisition. At year end, the capital assets are recorded, at cost, with a corresponding increase in equity in capital assets. These assets are amortized against equity in capital assets based on the amortization policy for the asset category.

2. Effective January 1, 2009, capital assets will be recorded as an asset on acquisition and amortization will be expensed based on the amortization policy for the asset category.

3. All capital expenditures must be planned and approved, as part of the budgeting process unless funded by an external source, such as by donation or grant (refer to 3. in this section and section below entitled Grants and Cash Donations), as follows:

a. Included in the Furniture and Equipment expense account, meeting the capital expenditure criteria outlined in this policy, and funded from the Operating Budget;

b. Included in Information Technology Services accounts (e.g. computer hardware, software);

c. Included as a lease expenditure in any expense account, assuming it meets the criteria of a capital lease in accordance with generally accepted accounting principles, and funded from the Operating Budget;

d. Included as a Library Material expenditure and funded from the Operating Budget; or

e. Included in the Replacement Reserve Plan and funded from the Replacement Reserve fund.

4. Purchase of capital assets that are funded externally may not be specifically included in the operating budget or Replacement Reserve Plan in the year of acquisition, but must be separately authorized by either the Library Board or the Endowment Fund Board of Management.

Capitalized Assets - Valuation

Capital Assets versus Non-capital Expenditures

1. An item will be classified as a capital asset (capitalized under generally accepted accounting principles), if it is a non-consumable, tangible item, valued at a single amount greater than $2,000 and with a life expectancy of at least two years. Tangible items valued at single amounts less than $2,000 will be classified as a non-capital asset (i.e. non-capitalized expenditure).

2. An exception the general rule stated above will apply for library collection materials acquired. Refer to section Library Material Collection Items below.

Purchased and Leased Assets

1. The capitalized cost of purchased assets is to include the purchase or acquisition price and related freight, installation, customs charges, taxes (net of rebates) and other direct costs of getting the asset into condition necessary for its intended use. Capital equipment purchased will sometimes have add-on items that are not initially ordered as a single amount, but should still be included as part of the historical cost.

2. Other direct costs may include software if included with the physical capitalized equipment, and warranty costs for the first year only, if included in the acquisition price. Costs that will not be capitalized include training and maintenance unless these costs cannot be separated from the acquisition cost.

3. Items acquired by lease will be classified as a capital asset if the item meets the definition of a capital asset in accordance with this policy as well as meets the criteria of a "capital lease" as defined by generally accepted accounting principles. Capital leases will be capitalized in accordance with generally accepted accounting principles.

Constructed Assets

Capital assets that are constructed (e.g. building improvements) are capitalized as work progresses and amortization commences when work is substantially performed and the building improvement or other constructed asset is ready for occupancy or use. Construction costs include all direct costs associated with the project that are incurred during the period when planning for the construction begins and ends when the construction project is substantially performed. They also include any overhead costs directly attributable to the construction or development activity.

Grants and Cash Donations

Grants and cash donations received to help fund the costs of a capital asset do not reduce the cost of the asset. The amounts received will be recorded as deferred capital contributions and amortized into revenue on the same basis as the asset to which it relates.

Donated Assets

Donated or contributions of capital assets are capitalized at the appraised fair market value at the date of contribution.

Works of Art

Artwork purchases are expensed as acquired. Works of art donated are recorded as revenue and expense, at the appraised fair market value, at the date of contribution.

Consumables

Tangible assets may be considered consumable goods if they are used in the daily operations of the Library. These will not be considered capital assets even if they are purchased in bulk and the consumable will last more than two years. They will be expensed or, if material, established as inventory and expensed as the inventory is used or consumed over time.

Building Improvements versus Repairs and Maintenance

1. Expenditures made to maintain an existing capital asset that restores the capital asset to working condition but does not extend the life of the capital asset will be considered repairs and maintenance expenditures. These may include such examples as, repairs to the roof, repainting of a building, or painting of interior offices.

2. The cost incurred to enhance the service potential of a capital asset is a building improvement. Service potential may be enhanced when there is an increase in the previously assessed service capacity, associated operating costs are lowered, the useful life is extended, or the quality of output is improved.

3. The cost incurred in the maintenance of the service potential of a capital asset is a repair, not a building improvement. If a cost has the attributes of both a repair and an improvement, the portion considered to be a building improvement is included in the cost of the capital asset.

Library material collection items

1. For the purposes of this policy, CD's DVD's and paperbacks will be deemed to be short-life cycle items with an average shelf life of five (5) years.
2. All other library material collection items, other than electronic resources, are deemed to have an average shelf life of ten (10) years.

3. Capitalization of existing collections will be performed as follows:

a. For the purposes of valuing the existing collection, short-life cycle collection items will be deemed to have the same shelf life as other collection material (i.e. ten (10) years;

b. Collections over ten (10) years old will be considered to be fully amortized (i.e. zero book value);

c. Collections under ten (10) years will be valued using historical cost records from the accounting systems and/or audited financial statements;

d. The value of collections under ten (10) years will be adjusted for:

i. Subscriptions to electronic resources (e-resources);

ii. The cost of items discarded to date; and

iii. Amortization based on ten (10) years on a straight-line basis (based on information on date of purchase, collection category and number of items from the acquisitions system);

e. The cost of items discarded to date will be estimated unless this information is otherwise available from the acquisitions system;

f. The value of collections under ten (10) years will be compared to information available in the acquisitions system related to either historical cost or list price net of total discounts or weighted average discount rates to double-check reasonableness of the estimates.

4. Accounting for collections in future years will be performed as follows:

a. Library collection materials, other than subscriptions to e-resources, will be capitalized based on actual cost recorded in the acquisitions system, not including the cost of processing;

b. Cost is defined as list price less applicable discount from suppliers plus shipping costs estimated at 0.5% and any applicable taxes, excluding G.S.T., which is eligible for 100% rebate.

c. Short-life cycle collections are assumed to have a useful life of five (5) years;

d. Library collection materials, other than short life cycle collections and subscriptions to e-resources, are assumed to have a useful life of ten (10) years;

e. Subscriptions to e-resources will not be capitalized, but rather, will remain an expense in the year of acquisition to reflect that annual license fees do not represent a tangible asset;

f. Processing charges for library materials will not be capitalized based on materiality and cost-benefit constraints;

g. Donations of rare library materials valued at $2,000 or more will be capitalized. All other donations of library materials will be expensed in the year of acquisition. Valuation will be based on estimate or appraisal by a qualified, independent appraiser;

h. Disposal of library collections will be based on the average historical cost per item from the year that the item was purchased multiplied by the number of items disposed. This will be done for each category of library material (e.g. hard cover). Average historical cost will be calculated by dividing the total net cost of a category by the number of items purchased in that category;

Amortization

1. Amortization or depreciation is an accounting cost allocation method of a capitalized asset over its useful life. It is not intended, at any time, to necessarily represent the fair or market value of a capital asset. Amortization is recorded for a full year in the year of acquisition for all capital assets except for constructed capital assets. Amortization does not begin on constructed capital assets until work is substantially performed and the building or other constructed asset is ready for occupancy or use. Capital assets are placed into categories and amortized on a straight-line manner over the estimated useful lives and annual rates as follows:

Safeguarding Measures

1. Care and custody of capital and non-capital assets rests with the Library person (generally the Branch and/or Department head) providing the resources for the purchase of the assets and/or the person responsible for the physical area where the assets are located.

2. All persons/branches/departments that use and care for capital and non-capital assets must ensure that reasonable safeguarding measures are in place at all locations where these assets reside to prevent damage to or the loss of such assets. In addition reasonable and appropriate measures are necessary to identify, track or tag the physical existence and location of all assets. Periodic verifications to the existence and condition of assets should be conducted. Any assets considered surplus or scrap should be removed or redeployed in accordance with the Surplus Asset/Redeployment Disposal Policy.

Disposal of Assets

Disposal of assets should be done in accordance with the Surplus Asset/Redeployment Disposal Policy.

Related Policies

Purchasing policy 3.6

Gift and Fundraising policy 3.4

Surplus Asset/Redeployment Disposal policy 3.9

Reserve Fund policy 3.7