2017-COH - DWS Financial Statements and Supplementary Information With Independent Auditor's Report

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County of Hawaii Department of Water Supply (A component unit of the County of Hawaii, State of Hawaii) NOTES TO FINANCIAL STATEMENTS June 30, 2017 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) (8) Capital Assets - Capital assets in service as of January 1, 1950, date of inception of the Department, were recorded at the cost of the assets acquired by the County for its water system from January 1, 1924 to December 31, 1949, less accumulated depreciation to December 31, 1949 as determined by the Department. Assets purchased prior to 1924 and property acquired by gift or grant prior to 1950 are not included in capital assets. Additions to capital assets since January 1, 1950 are stated at cost and include contributions by governmental agencies, private subdividers, and customers at their cost or estimated cost. The capitalization threshold of assets is $400 with estimated useful lives greater than one year. Construction costs include amounts for contract work, engineering supervision, and other direct costs and overhead costs. Construction period interest is capitalized on capital assets constructed with tax-exempt debt and amounted to $6,975 for the fiscal year ended June 30, 2017. Preliminary survey and investigation charges represent expenditures incurred to determine the feasibility of potential water system sites for future development. Maintenance and repairs and minor replacements are charged to operations. Major replacements, renewals, and betterments are capitalized to capital asset accounts. Depreciation is computed using the straight-line method over the following estimated useful lives: Distribution mains and accessories 40 years Structures and improvements 40 to 50 years Electric and hydraulic pumping equipment 10 years Services 25 years Transmission mains and accessories, hydrants and purification system 40 years Meters 10 years Transportation, communication, tools and office equipment and furniture 5 years Other equipment 5 to 10 years Other fire protection plant 25 years Annual depreciation rates are applied to costs of the various classes of depreciable assets on the group basis or, as to transportation equipment, to the cost of individual units of property. Gains or losses resulting from the sale, retirement, or disposal of capital assets in service are charged or credited to operations in the year realized. 17