Effective Date: April 1, 2016

Applicable FAM Policies: 510 - Tangible Capital Assets

Applicability: GNWT Departments and Public Agencies

INTERPRETATION

All direct costs for the acquisition or construction of a Tangible Capital Asset (TCA) must be:

• Tracked within a work in progress (WIP) asset account until such time as the TCA is substantially complete or the TCA is put into service for its intended use, whichever comes first.
• Put into service within 30 days of its substantial completion or the initiation of its active use. Pooled assets, such as highways, are to be put into service within 30 days of a project ceasing for the fiscal year or within 10 working days of the fiscal year-end.
• Expensed in the year if the project no longer has a budget and is not identified as a priority within the Capital Budget.

All direct costs accumulating towards the ultimate acquisition or construction of a TCA are capital in nature and need to be accounted for as such, in a manner that facilitates consistent recording of the Government Reporting Entity TCAs in a timely manner.

The cost of a constructed asset includes direct construction or development costs (such as materials and labor), and overhead costs directly attributable to the construction or development activity.1 Assets under construction also include those assets that have been acquired but require additional work to get them ready for use. It is the Department’s or Public Agency’s responsibility to ensure that all costs are confirmed and recorded as soon as practical to ensure that the balance in WIP is accurate and that TCAs are able to be moved into service within the specified timelines.

Controllable assets (i.e., Non-TCAs) are not charged to WIP (only in SAM).  Costs to acquire controllable assets are expensed when incurred.

A substantially complete TCA brought into service shall include an estimate of capital costs to bring the TCA to full completion if the incremental costs are expected to be below $50,000. Any additional immaterial costs incurred after the project has been moved into service shall be an operational expense. Where significant costs, over $50,000, remain to be incurred, the final costs shall be added to the TCA as a betterment. Determining when a tangible capital asset, or a portion thereof, is ready for productive use requires consideration of the circumstances in which it is to be operated. Normally it would be predetermined by reference to factors such as productive capacity, occupancy level, or the passage of time.²In the case of system development or enhancements, each identifiable stage shall be recorded as a TCA, related betterment, as the feature is put into use.

The cost of a TCA includes the purchase price (fair market value (FMV) for donated assets), and direct construction or development costs attributed to the acquisition, construction or development of the asset.