Search Book

Contents

About This FAM

Responsible Agency: Office of the Comptroller General
Issued: Nov 2006
Last Updated: Feb 2013

Approval Announcements

1. Introduction

To reflect the estimated period costs of Government programs and services, the cost of a Tangible Capital Asset (TCA) used in providing a program or service is allocated to Operations as an expense called “amortization” over its useful life.
 

2. Policy

The cost of a TCA must be amortized over the estimated useful life, on a straight-line basis in accordance with the following Directives.
 

3. Directives

3.1 Amortization must be charged to Operations as an expense with an offsetting credit to an accumulated amortization account.
3.2 Amortization must be calculated and recorded on a monthly basis, using the straight-line method and started in the month in which the asset was brought into service. Departments shall commit amortization costs at the beginning of the fiscal year (by monthly summary/program/activity) until the month the amortization is recognized. Adjustments required in mid-year to reflect such events as betterments or disposals must be entered into the TCA System in a manner that reflects the accumulated amortization to the action date.
3.3 Because amortization is required on a monthly basis, TCA records must be always be posted up-to-date. The Senior Financial Officers in departments are accountable for TCA records to be current before month-ends.
3.4 A TCA must be recorded in an approved major asset category (see also FAM 2201 Appendix A) in accordance with the following amortization periods/ranges:
Major Asset Category Amortization Periods (Maximum)
Land Indefinite (not amortized)
Roads 40 years
Bridges

40 years;

Deh Cho Bridge only – 75 years
Ferries 25 years
Airstrips and Aprons 40 years
Aircrafts 20 - 40 years
Buildings 40 years
Fuel Distribution Systems 15 - 40 years
Water/sewer Works 15 - 25 years
Mainframe and Software Systems 5 – 10 years
Leasehold Improvements The lesser of the improvement’s useful life or remaining lease term plus renewal option
Betterments Over the useful life of the asset to which the improvement was made or the useful life of the betterment if significantly shorter.
Mobile and Heavy Equipment 7 – 15 years
Major Medical Equipment 5 – 15 years
Other Major Equipment 5 – 15 years
Park Improvements 10 - 40 years
3.5 When a TCA belongs to a category that offers a range of possible durations for useful lives, departments shall determine the useful life in a rational and systematic manner, appropriate to the nature and use of the TCA, in consultation with responsible asset managers.
3.7 The amortization period of a TCA under a capital lease shall be over the lesser of the lease term or the useful life of the major asset as categorized in section 3.4 above.
 

4. Guidelines

4.1 An asset’s useful life is not the same as its physical life. Useful life is the time duration over which the Government expects a benefit to be derived.
4.2

Asset managers should conduct regular periodic reviews of the estimate of the remaining useful life of a TCA to determine whether revisions are appropriate. A revision to a TCA’s estimated useful life is considered a change in estimate and is to be made prospectively (i.e., no adjusting entries are made for prior periods).

Significant events that may indicate a need to revise the estimate of the remaining useful life of a TCA include but are not necessarily limited to:

  • a material change to the extent and manner in which a TCA is used;
  • the removal of a TCA from service for an extended period of time;
  • physical damage;
  • significant technological improvements;
  • obsolescence;
  • a material change to the maintenance program;
  • studies of similar items retired;
  • the condition of existing similar items;
  • a material change in the demand for services provided through the use of a TCA; and,
  • a material change in the law or environment affecting the period of time over which the TCA can be used.
 

5 . Authorities and References

  • FAM 2201
  • PSAB (PS 3150.21- 31)
 

6 . Consequences from Failure to Comply

Any failure to respect FAM policies and directives may give rise to an assessment, the results of which will be included in the Comptroller General’s annual report to the Legislative Assembly.

Failure to comply with policies and directives made under the Financial Adminsitration Act (FAA) may also result in actions under Part X of FAA and it is possible to seek a legal remedy in the Territorial Courts.