HomeMy WebLinkAboutItem #4 Capitalization ThresholdMemorandum
To: The Mayor and City Council Members of The City of Chubbuck
From: Dan Christensen
City Accountant
Subject: Capitalization threshold for assets, leases, and subscriptions
A capitalization threshold for assets, leases, and subscriptions is used to avoid the
administrative burden of recording and tracking numerous small -value items as capital.
This allows entities to expense minor purchases instead of capitalizing them and
depreciating them over time. With the level of financial environment that City of
Chubbuck is involved in, the expenses have insignificant effect on financial statements
for the need to be depreciated over time.
There has been a significant increase in inflation over the past two years, and a
significant increase in inflation could be a sufficient reason to increase the threshold.
Therefore, the finance department suggest the City of Chubbuck's capital assets,
leases, and subscriptions threshold should be set at $35,000.