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South Lyon council adopts $10,000 fixed-asset capitalization policy
Summary
The council voted to replace an internal $2,500 capitalization threshold with a formal $10,000 policy aligned with GASB guidance; motion carried by roll call vote.
A city staff member presented and the South Lyon City Council on March 24 approved a formal fixed-asset capitalization policy that raises the capitalization threshold from the city’s prior internal guidance of $2,500 to $10,000, officials said.
The change, presented by a city staff member responsible for the policy review, follows recommendations from the city’s auditors, Plante Moran, and guidance from the Governmental Accounting Standards Board (GASB). The presenter said the new threshold is intended to align South Lyon’s accounting practices with common municipal standards and reduce the number of low-value items carried as assets on the city’s books.
City staff told the council the city had been operating under an internal policy that capitalized items at $2,500 or more in some cases. The presenter said that Plante Moran has urged the city to adopt a formal policy using a $10,000 threshold because “items less than $10,000 dollars 10,000 threshold, are considered minimal” and would typically be expensed rather than capitalized.
Council member Mosher moved to approve the fixed-asset capitalization policy; Council member Kibble seconded the motion. In a roll call vote the motion carried: Mosher — yes; Kurzweil — yes; Bill — yes; Kibble — yes; Kennedy — yes. The motion was recorded as carrying.
The staff presentation included proposed depreciation schedules and category guidance (for example, longer lives for water-treatment assets and shorter lives for tools and equipment) that the presenter said were drawn from standard accounting guidelines and GASB recommendations. The presenter said the schedules are recommendations rather than inflexible rules and that some categories were split into more detailed lines than the city previously used.
Council members asked for the rationale for raising the threshold and for the source of the depreciation schedules. The presenter said the higher threshold reduces “carrying more liability on your books” and that the schedules follow standard recommendations from accounting standards boards and the city’s auditors. Council member Kurzweil asked why the change had not been made earlier; the presenter replied that Plante Moran had been encouraging a formal policy for several years and that rising costs and more capital purchases made a formal policy timely.
The adopted policy will be implemented through a resolution attached to the staff materials and will change how the city records purchases with useful lives of more than one year. The resolution and the attached capitalization schedule were provided to council with the meeting materials.
