(e) Materials and Supplies Inventory Materials and supplies inventory, consisting of items held for consumption, are stated at weighted average cost using the moving average method. In addition, the Authority performs a manual count at the end of the fiscal year of fuel, chemicals and certain field supplies that are not yet used in operations, and values them at cost. (f ) Prepaid Expenses Certain payments to vendors reflect costs applicable to future accounting periods. These costs are recorded as prepaid expenses in the accompanying Statements of Net Position and are expensed in the period they are used. (g) Property, Plant and Equipment The Authority capitalizes all property, plant and equipment with a cost greater than $5,000 if the asset will have an estimated useful life of five years or more. Purchased property, plant and equipment are stated at historical cost. Contributed assets received from developers and others are recorded at acquisition cost on the date of donation. The acquisition cost is based on the Authority’s estimated cost to construct or purchase similar assets. See Note 12, Contributions from Developers and Others, for additional details on contributed assets. Property, plant and equipment includes construction in progress, which represents costs associated with the construction of assets that will be used in the Authority’s operations when completed. Expenditures for repairs and upgrades which materially add to the value or life of an asset are capitalized. Other maintenance and repair costs are expensed as incurred. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly. If determined to be permanently impaired, capital assets are reported at the lower of carrying or fair value. The Authority did not maintain any impaired capital assets at year end. Depreciation and amortization for both purchased and contributed assets is recorded as depreciation and amortization expense on a straight-line basis over the following estimated useful lives: Lines and improvements Buildings Equipment Vehicles Meters 50 years 35 - 40 years 5 - 15 years 5 - 10 years 15 years Advance Capacity Payments are capitalized as intangible assets in accordance with the provisions of GASB Statement No. 51. They are payments made to wholesale water suppliers as part of multi-year capacity agreements, and are amortized over the useful life of such agreements. From their inception, these agreements are amortized over estimated useful lives from 40-50 years. (h) Equity in Upper Occoquan Service Authority (UOSA) As further explained in Note 4, Equity in UOSA, the Authority participates in a joint venture with three other local jurisdictions. The Authority accounts for its investment in the joint venture using the equity method of accounting. (i) Compensated Absences Accrued leave balances that are eligible for pay out upon employee separation are presented as a liability in the accompanying Statements of Net Position. The Authority has a traditional leave plan in which employees hired before January 1, 2012 accrue annual leave in varying amounts based on years of service, and sick leave at a rate of four hours bi-weekly. The Authority also has a Paid Time Off (PTO) plan, in which employees hired as of January 1, 2012 and employees who made an irrevocable election to convert to the PTO plan accrue hours in varying amounts based on years of service. At the time of separation from service, employees are compensated for accumulated annual leave up to 300 hours and up to 50% of accumulated sick leave hours based on years of service, or PTO leave up to 450 hours. ( j) Bond Premiums, Deferred Losses on Refundings and Issuance Costs Bond premiums and deferred losses on refundings are deferred and amortized over the life of the bonds using a method which approximates the effective interest method. Deferred losses on refundings, net of amortization, are presented as deferred outflows of resources on the accompanying Statements of Net Position. Deferred outflows of resources is a separate financial statement element which represents the consumption of net position that applies to a future period, and will not be recognized as an outflow of resources (expenditure) until then. Bond premiums, net of amortization, are presented as an increase to the face amount of bonds payable on the accompanying Statements of Net Position. Any balances for these items are presented in the schedules in Note 5, Bonds Payable and Note 7, Debt. Issuance costs are expensed in the year incurred. NOTES TO FINANCIAL STATEMENTS FINANCIAL SECTION 39
Prince William County Service Authority | 4 County Complex Court Woodbridge, VA 22192
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