TANGIBLE CAPITAL ASSETS

Terms and Definitions

1. Amortization is the accounting process of allocating the cost less the residual value of a tangible capital asset to operating periods as an expense over its useful life in a rational and systematic manner appropriate to its nature and use.
   
   
2. Betterment is a cost incurred to enhance the service potential of a tangible capital asset. Betterments increase service potential (and may or may not increase the remaining useful life of the tangible capital asset). Such expenditures would be added to the tangible capital asset’s cost.
   
   
3. Cost of TCA is the gross amount of consideration given up to acquire, construct, develop or better a tangible capital asset, and includes all costs attributable to the asset’s acquisition, construction, development or betterment, including installing the asset at the location and in the condition necessary for its intended use. Included in the cost of TCA are:
   
   
   1. Temporary financing incurred during the construction of an asset.
      
      
   2. Costs of internal staff seconded to a project which results in a TCA where their regular duties are backfilled.
      
      
   3. Development charges and permits.
      
      
   4. Costs of internal staff whose primary duties are to provide services relating to capital projects (for example, engineering services). Costs of staff who are assigned to participate in projects as part of their normal range of duties and who are not specifically seconded and backfilled would not be included in cost of TCA (for example, technology or finance staff who are not backfilled). These overhead type costs are only included in the cost of a capital project in the event that external funding of the project allows for their recovery; they will be recorded in a separate general ledger account and excluded from the cost of TCA.
      
      
   5. All non-recoverable taxes.
      
      The cost of a contributed tangible capital asset, including a tangible capital asset in lieu of a developer charge, is considered to be equal to its fair value at the date of contribution. Capital grants would not be netted against the cost of the related tangible capital asset. The cost of a leased tangible capital asset is determined in accordance with Public Sector Guideline PSG-2 Leased Tangible Capital Assets.
      
      
4. Disposal is the processes involved in the removal of the TCA from use and from the TCA sub-ledger subsequent to: donation, sale, abandonment, or destruction.
   
   
5. Fair value is defined in accounting standards as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction who are under no compulsion to act.
   
   
6. Linear Assets are assets constructed or arranged in a continuous and connected network. Roads and sewers are examples of linear assets.
   
   
7. Pooled assets are homogenous in terms of their physical characteristics, use and expected useful life. Pooled assets are amortized using a composite amortization rate based on the average useful life of the different assets in a group.
   
   
8. Straight-line amortization allocates the cost less estimated residual value of a capital asset equally over each year of its estimated useful life.