Although the content, presentation, and
basis of accounting may vary according to the reporting requirements
of Statement 34, the basic elements of the financial statements
remain the same. The major elements of the financial statements
(i.e., assets, liabilities, fund balance/net assets, revenues, expenditures,
and expenses) are discussed below, including the proper accounting
treatments and disclosure requirements. However, the narrative does
not exhaustively discuss all reporting requirements that school
districts may face. School district personnel, therefore, should
refer to the actual GASB statements or other definitive sources
for detailed disclosure requirements and reporting formats.
Assets are defined as a probable future economic benefits obtained
or controlled by a particular entity as a result of past transactions
or events. The following typically represent the major asset categories:
Cash and Investments
- Cash and Investments
- Prepaid Items
- Capital Assets
Cash and investments often represent a large portion of the assets
on a government's balance sheet. Because of the importance of these
assets, proper management based on sound investment policies and strategies
is vital. The investment of excess funds is often governed by statute.
Many state governments have adopted legal frameworks that restrict
the investment activities of local governments, including school districts.
These restrictions often place limitations on the types of investments
allowed, regulate procedures used to manage investments, and require
governing bodies to institute certain review procedures.
The following discussion about cash and investments does not illustrate
all the possible investment scenarios that a local government might
use. However, the following five general rules may protect a school
district from problems related to investment decisions.
Certain words in common usage have more limited
definitions when they are used for accounting and financial reporting.
Within the context of governmental accounting, the following definitions
describe the specific content of accounts used by governmental entities:
- For public funds, the investment objectives
have traditionally been safety of principal first, then liquidity,
followed by yield.
- All investments should be made with consideration
of the district's cash requirements and cash flows.
- The district must understand the investment
instrument, the investment mechanics, and the associated risk
of the investment. Knowing the factors and variables that affect
the market value of each investment will help the district determine
investment policies and strategies.
- School district personnel should know with
whom they are dealing before purchasing an investment. This means
researching any financial institutions or brokers/dealers that
the district uses.
- Proper protection of investments includes acquiring
legal ownership or custody of securities. It also includes ensuring
that deposits have been properly insured and collateralized.
The pooling of cash and investments provides
several advantages, including better physical custody and control,
enhanced investment opportunities, and ease of operations. It may
also simplify custody, collection, and disbursements. In certain instances,
the pooling of cash and investments may be prohibited in contractual
clauses such as bond indentures or through legal restrictions. If
the school district pools cash for investment purposes, the resulting
pooled cash and investments may qualify as a cash equivalent for participating
funds, even though some of the pooled investments would not individually
meet that definition.
- Cash is considered to be the most liquid (readily
available) asset owned by an entity and represents readily available
cash held by the organization.
- Cash equivalents are short-term, highly liquid
investments (readily convertible to known amounts of cash) that
are so near to maturity that they present an insignificant risk
of changes in value resulting from changes in interest rates.
Generally only investments with original maturities of three months
or less qualify under this definition. Items commonly considered
cash equivalents are treasury bills, commercial paper, short-term
deposits in financial institutions, and money market funds. However,
investments that qualify as cash equivalents are not all required
to be treated as cash equivalents. Therefore, an entity should
establish a policy concerning the classification of qualified
investments as cash equivalents, which may be no more liberal
than the authoritative definition except as discussed below under
pooling of cash and investments. The policy must be disclosed
in the notes to the financial statements.
- Investments are defined as securities and similar
assets acquired primarily to earn income or profit. A security
is a transferable financial instrument that evidences ownership
or creditor status. Securities that are often held by or pledged
to school districts generally include U.S. Treasury bills, notes,
and bonds; federal agency and instrumentality obligations; direct
obligations of a state or its agencies; commercial paper; negotiable
and non-negotiable certificates of deposit; fully collateralized
repurchase agreements; and prime domestic bankers' acceptances.
Statement Presentation and Disclosure. The complexity and
range of investment potential and the large amounts of cash and
other assets present in most governmental units emphasize the need
to carefully capture and present these data in usable form. Cash
and investment balances are segregated into individual funds and,
depending on contractual requirements, may be classified as restricted
assets. If a fund overdraws its share of a pooled cash account,
the overdraft should be reported as a liability of that fund. Fund
overdrafts of this type should be reported as interfund payables
Disclosures for cash and investments normally
include, in addition to the GASB Statement 3 disclosures (see following
chapter), the valuation basis of investments (e.g., investments
are stated at fair value that approximates market). Changes in fair
value are included as a component of investment income.
The detailed disclosure requirements for cash
and investments have been established in GASB Statement 3, Deposits
with Financial Institutions, Investments (including Repurchase Agreements),
and Reverse Repurchase Agreements (issued in April 1986); GASB
Statement 28, Accounting and Financial Reporting for Securities
Lending Transactions (issued in May 1995); and GASB Statement
31, Accounting and Financial Reporting for Certain Investments
and for External Investment Pools (issued March 1997). These
GASB statements and the entity's external auditor should both be
consulted regarding disclosure requirements for cash and investments.
Receivables usually arise as a result of revenue transactions. The
following are the main sources of revenues for school districts
that would result in outstanding receivables:
The accounting for revenues and related accounts
receivable in governmental entities depends on the type of fund in
which the revenue is recorded.
- Property taxes
- State and federal grants
- Intergovernmental revenues (due from other
- Interest income
governmental funds use the modified accrual basis of accounting,
governmental fund revenues should be recognized in the accounting
period in which they become susceptible to accrual, that is, when
they become both measurable and available to finance expenditures
of the fiscal period. "Available" refers to the collectibility of
the receivable within the current period or soon enough thereafter
to be used to pay for liabilities of the current period. A general
criterion for availability is 60 days, although a longer or shorter
period may be used, except for property taxes in which the maximum
period may not be more than 60 days. The availability period will
be disclosed in the notes. Each entity should adopt a revenue accrual
policy that implements the susceptibility to accrual criterion and
applies it consistently. This policy should also be disclosed in
the notes to the financial statements.
Proprietary funds use the accrual basis of accounting
to determine when revenues and related receivables should be recorded.
Revenues are recognized when they are earned, that is, when the
earnings process is complete and an exchange has taken place.
GASB Statements 33, Accounting and Financial
Reporting for Nonexchange Transactions, and 36, Recipient
Reporting for Certain Shared Nonexchange Revenues, may have
an impact on a governmental entity's reporting of revenues related
to certain non-exchange transactions. Entities should consult the
statements and their external auditors to determine the impact.
Property Taxes Receivable. Property
taxes are generally assessed to finance expenditures of a specific
fiscal year. On the assessment date or levy date, the property taxes
become a lien against the assessed property. Property taxes should
be recorded in the governmental funds by using the modified accrual
basis of accounting (recorded when they are both measurable and
available). The amount of the property taxes receivable is based
on the assessed value of the property, the current property tax
rate, and an estimate of the uncollectible portion. When taxes are
levied, the revenue and related receivable should be recognized,
net of estimated uncollectible amounts. A receivable is usually
recognized at the time an enforceable legal claim arises. The revenue
is usually recognized in the first period in which the use of the
revenues is permitted or required.
If taxes that are levied to finance a subsequent
fiscal period are collected in the current period, the amount collected
should be recorded as deferred revenue. In the next fiscal year,
a journal entry will be recorded to recognize the revenue amount
that was collected in advance.
In the fund financial statements, when property taxes are delinquent
but expected to be collected, they should be reported as deferred
revenues if it is estimated that the taxes will not be available
to pay current obligations of the governmental fund. This situation
indicates that the delinquent property taxes are not expected to
be collected within 60 days of the close of the fiscal year, although
a shorter availability period may be used.
Due From State. This receivable
represents amounts from state resources that exceed the amounts
received during the fiscal year for which the school district has
met all eligibility requirements. A district should also use the
measurable and available criteria that are consistent with the modified
accrual basis of accounting in the governmental funds to record
revenues due from the state. Revenue due from the state for which
all eligibility requirements were met during the fiscal year, and
which is expected to be received within the availability period
(e.g., 60 days) from the financial statement date, should be recorded
as a receivable using this account.
Due From Federal Agencies. This
account represents amounts for which all eligibility requirements
have been met by a district under a federal financial assistance
program that are expected to be available to finance current liabilities.
Such revenues are usually accounted for in special revenue funds
using the measurable and available criteria, as appropriate for
a modified accrual-based fund. If this is an expenditure-driven
grant, revenues may be recognized only to the extent that expenditures
have been incurred.
Due From Other Governments or Agencies.
In some instances, districts become eligible for revenue from
other local governments or agencies through grant programs or by
providing services. The receivable earned from such revenue should
be recorded only if it also meets the measurable and available criteria.
Thus, when the revenue has been earned under the grant program or
the services have been provided, the district should recognize the
revenues and receivables for the amount earned. In addition, if
the amount of an outstanding receivable at the end of a fiscal year
is not expected to be collected within the availability period (e.g.,
60 days) from the financial statement date, the district should
record a deferred revenue for the outstanding amount.
Accrued Interest Receivable.
Accrued interest represents the amount of interest at the end
of an accounting period on all cash accounts and investments held
at that date. Accrued interest should be computed for all investments
and cash accounts held by the government that generate interest
earnings regardless of the expected payment date.
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Governmental accounting generally requires
that amounts spent to purchase goods be recorded as an expenditure
at the time of the purchase. An exception to this general rule is
made for inventory. If the amount of inventory on hand at year-end
is significant, the value of such inventory should be recorded as
an asset. This is considered the "Purchase Method" whereupon fund
balance is reserved for the amount of inventory. Inventory may also
be recorded as an expenditure when it is consumed rather than when
it is purchased. Under the "Consumption Method," purchase transactions
are first recorded in the inventory account. As inventory is actually
used, an entry to recognize the expenditure is posted to the appropriate
accounts. This method is required for the proprietary funds.
It is not uncommon for school districts to have
a relatively high level of inventory at the end of the fiscal year,
since this often coincides with the start of a new school year.
In addition to the balance sheet presentation, note disclosure regarding
the method of accounting for inventory should be made. Districts
often distribute inventoried supplies to schools prior to fiscal
year-end to accommodate the beginning of the new academic school
year. Such inventories may either be included in inventory at year-end
or be expensed in the year of distribution.
For the entity-wide statements, the consumption
method must be used. If the purchase method is used in the governmental
funds and the consumption method produces a different result, the
difference should be included in the reconciliations of governmental
funds to governmental activities. (Second Statement 34 Q & A, Q23)
Inventories in school districts generally represent goods that are
insignificant individually, but are significant as a whole. These
items may be described as follows:
The accounting for inventory can be broken
down into two general areas:
- Consumable goods that have a relatively short
shelf life. Common examples are office supplies, paper, computer
supplies, building and maintenance supplies, and science lab supplies.
- Items that are expected to be used within a
short time, including cafeteria foods such as commodities received
from the United States Department of Agriculture (USDA).
- Tangible personal property that is durable
but does not meet the entity's criteria for capitalization as
an asset. Examples are textbooks, calculators, and physical education
For internal control purposes, these two functions
should be performed by individuals (or departments, if the district
is of sufficient size) that are organizationally independent. The
results of the two processes should then be reconciled by personnel
external to these functions. This segregation of duties will improve
the internal controls over inventory and may mitigate the risks of
theft or defalcation.
- Monitoring and valuation of inventory
- Accounting for transactions related to inventory
for and Control of Inventory. Governmental entities have
several options for physical counts of inventory. Independent auditors
are required by generally accepted auditing procedures to conduct
physical observations of inventories at least annually when such
inventories are material to the district's operations. The physical
observations should be conducted as of the balance sheet date or
as of a single date that is within a reasonable time before or after
the balance sheet date. The independent auditor is usually present
at the time of the inventory to assess the effectiveness of the
inventory-taking procedures and to determine the reliance that the
independent auditor can place on the entity's representations relating
to the physical condition and quantities of the inventory. The most
common physical inventory count methods are
Accounting for Commodities. School
districts that receive federal commodities during the year should
recognize the fair value as revenue in the period when all eligibility
requirements are met (typically, when the commodities are received).
(Guide to Implementation of GASB Statement 34 and Related Pronouncements
Q&A, Q152). Because the federal agricultural commodity program involves
purpose restrictions in the use of the resources, the value of inventory
remaining on hand at fiscal year-end should be reflected as a reservation
of fund balance/restriction of net assets. (Statement 33, paragraph
- cycle counts,
- full counts taken at fiscal year-end, and
- full counts taken at times other than fiscal
However, there may be instances
in which resources are transmitted before the eligibility requirements
are met. These resources would be reflected by the recipient as
deferred revenues. (Statement 33, paragraph 21).
The advanced funding of pension plans is an intangible asset, which
is recognized by an employer for contributions to a pension plan,
which were greater than pension expense. This asset will be amortized
against the pension costs of the employer when due.
Governmental entities are responsible for accounting for, controlling,
and reporting both current and capital assets. Capital assets have
certain properties that distinguish them from other types of assets:
Capital assets may include the following:
- Tangible or intangible in nature
- Long-lived (have a life longer than one year)
- Of a significant value at the time of purchase
- Reasonably identified and controlled through
a physical inventory system
The emphasis in governmental accounting for
capital assets is on control and accountability. Accordingly, a variety
of data relating to an entity's capital assets must be maintained
to ensure control and accountability over them:
- Land and land improvements
- Buildings and building improvements
- Machinery and equipment
- Technological assets such as computers and
- Works of art and historical treasures (discussed
- Infrastructure (discussed separately below)
Capital asset records are necessary to demonstrate
accountability for the custody and maintenance of individual items
and to assist in projecting future requirements. All capital transactions
for the acquisition of capital assets should be controlled through
a well-defined authorization procedure. If the budget does not authorize
the purchase of specific items, approval power, subject to specific
monetary limits, should be assigned to the chief administrator or
to a person designated by the chief administrator. The entity should
adopt policies to govern this situation even if it has not been an
issue in the past.
- Quantity and types of assets
- Location of assets
- Life expectancy of assets
of Capital Assets. Capital assets are included in the financial
records at cost. In some situations, the purchase or acquisition
documents may not be available for capital assets already on hand.
If reliable historical records are not available, an estimate or
appraisal of the original cost based on other information, such
as price index levels at time of acquisition, may be used. The intent
of such valuation is to record a fair value at the date of acquisition
and not expend excessive resources in ascertaining exact costs.
If capital assets are acquired by gift, then the fair value on the
date received is the appropriate amount to include in the capital
Capital assets may be acquired by several methods:
All capital assets acquired in some manner
other than gift are recorded at the cost necessary to place the asset
in service. Capital assets arising from gifts or donations are recorded
at their estimated fair value at the time of receipt.
- Tax foreclosures
- Gifts and contributions
Capital Asset Reporting. GASB
Statement 34 establishes reporting requirements for general government
capital assets. Previously, financial statement presentation for
capital assets of the general government was limited to the general
fixed asset account group in the combined balance sheet. No depreciation
was recognized on these assets. However, Statement 34 establishes
the following new reporting requirements for capital assets:
- Depreciable capital assets should be reported
in the Statement of Net Assets (a governmentwide statement) at
historical cost, net of accumulated depreciation.
- The historical cost should include the ancillary
charges necessary to place the asset into its intended location
and condition for use, including freight and transportation charges,
site preparation costs, and professional fees that directly relate
to the acquisition of the asset.
- Depreciable capital assets may be reported
on the face of the Statement of Net Assets as a single item or
by major class. Detailed information will be reported in the notes.
- Significant nondepreciable capital assets that
are inexhaustible, such as land, certain nondepreciable site improvements,
and infrastructure assets reported using the modified approach
should be reported separately from depreciable capital assets
on the statement of net assets. GASB has defined an inexhaustible
capital asset as one whose economic benefit or service is used
up so slowly that its estimated useful life is extraordinarily
long. Construction-in-progress should be included with nondepreciable
capital assets in the Statement of Net Assets.
- Accumulated depreciation may be reported on
the face of the Statement of Net Assets, parenthetically or as
a separate line item reducing capital assets. However, regardless
of the statement presentation in the Statement of Net Assets,
the notes to the financial statements should disclose balances
and changes in accumulated depreciation for the period by major
asset class, as well as information regarding depreciation methods
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Capitalization Thresholds, Estimated
Useful Lives, and Depreciation Methods for Capital Assets
Given the new requirements in Statement 34 to depreciate general
capital assets, governments must establish a range of policies regarding
capitalization thresholds for capital assets, estimates for useful
lives, and depreciation methods. Statement 34 does not prescribe
policies for any of these areas; however, note disclosure is required.
Management is granted discretion to determine appropriate policies
for control purposes in accordance with the laws and regulations
under which the entity operates. Some states have established specific
regulations surrounding capital assets; therefore, school districts
should consult state sources in establishing new policies.
Thresholds. Capitalization threshold refers to the dollar
value threshold at which purchases of assets will be capitalized
in the financial records of the governmental entity rather than
be recorded as an expenditure/expense at the time of purchase. Many
assets having useful lives greater than one year do not have values
that are material to the entity's financial statements. Additionally,
the costs of tagging, tracking, and accounting for numbers of immaterial
items may be considered excessive by the entity. As a result, many
local governments establish capitalization thresholds that exclude
reporting these items as capital assets and instead rely on systems
other than the financial management system for tracking and control
purposes (e.g., PC inventories, building equipment lists, maintenance
In determining an appropriate capitalization threshold, entities
should consider the following factors:
Several resources exist to guide governmental
entities in making informed decisions related to asset capitalization
thresholds, including industry guidelines for specific assets, state
auditors' and comptrollers' guidelines for state agencies, and the
implementation guide produced by the Association of School Business
Officials International (ASBO). These resources are typically available
via state web sites.
- Total value of all capital assets
- Impact of the new/revised capitalization threshold
on values reported in the statement of net assets
- Value of any related debt (financial statement
presentations may be misleading if significant assets acquired
through debt are excluded by the capitalization threshold)
- Costs associated with tracking and reporting
- Applicable state or federal requirements (typically
for grant funds)
Finally, local governmental
entities should review applicable state and federal requirements
related to asset capitalization in determining appropriate policies.
For example, the federal government uses a dollar threshold of $5,000
for federal grant management purposes. This threshold may have an
impact on an entity's policies, particularly as it relates to capital
assets that are acquired with federal grant funds.
Estimated Useful Lives. The
estimated useful life of an asset is the period (of months or years)
that the asset will be used for the purpose for which it was purchased.
In determining the estimated useful life of an asset, consideration
must be given to the asset's present condition and intended use,
maintenance policy, and how long the asset is expected to meet service
and technology standards. School districts may use general guidelines
obtained from professional or industry organizations, information
on comparable assets of other school districts/governments, and
internal historical data. The determination of appropriate estimated
useful lives is a management decision that is affected by a number
Many sources of information on estimated useful
lives are available to assist in establishing appropriate policies
in this area. These sources include, but are not limited to, the following:
- Experience with asset management
- Plans for asset use
- Property management practices
- Asset maintenance practices
- Applicable federal or state regulations
A periodic reassessment of the estimated useful
lives of capital assets may be appropriate. Any change in the useful
life of a capital asset should be applied prospectively in accordance
with Accounting Principles Board Opinion 20.
- GASB Statement 34 implementation guides issued
by state education agencies and other key state agencies, including
state auditors and comptrollers. Many of these agencies have web
sites that contain information about the useful lives of various
asset classes in the state. Further, many of these web sites may
be accessed through the GASB web site at http://www.GASB.org/.
- Statement 34 Implementation Guide for schools
issued by ASBO, International. This guide discusses capitalization
policies and depreciation methods at length.
Methods. GASB Codification Section 1400.113 states that
"depreciation expense should be measured by allocating the net cost
of depreciable assets (historical cost less estimated salvage value)
over their estimated useful lives in a systematic and rational manner."
Although GASB requires governmental entities to depreciate capital
assets (other than nonexhaustible assets), the Statement does not
prescribe the method. As a result, depreciation methods are a management
decision that should be based on the resources necessary to determine
the various calculations and the capabilities of asset management
systems. In addition to composite or group methods, any established
depreciation method may be used (e.g., straight-line, sum-of the-years'
digits, or double-declining balance).
Depreciation may be calculated for individual
assets or it may be determined for a
The depreciation method can vary for different
categories of assets.
- class of assets,
- network of assets, or
- subsystem of a network.
To simplify the
calculations involved, the composite method may be used to calculate
depreciation expense. It is applied to a group of similar assets
or dissimilar assets in the same class, using the same depreciation
rate, but not across classes of assets. The estimated life for the
group may be based on the individual weighted average, the simple
average of the useful lives of the assets in the group, or the weighted
average or assessment of the life of the group as a whole. This
method assumes no salvage value for assets; therefore, it simplifies
the calculations and the recording of asset dispositions.
Works of Art and Historical Treasures.
Works of art, historical treasures, and similar assets are a
special class of capital assets that may require developing a specific
capitalization and depreciation policy. These assets are defined
as items held singly or in collections that meet all of the following
conditions (Statement 34, paragraph 27):
Historical buildings, monuments, and fountains
are capital assets that may qualify as works of art, historical treasures,
or similar assets if they meet the requirements above. School districts
that have collections meeting the criteria above may choose not to
capitalize these collections of works of art or historical treasures.
- Held for public exhibition, education, or research
in furtherance of public service, rather than financial gain.
- Protected, kept unencumbered, cared for, and
- Subject to an organization policy that requires
the proceeds from sales of collection items to be used to acquire
other items for collections.
Depreciation is not required for those
capitalized collections or individual items that are considered
to be inexhaustible. Inexhaustible collections of individual works
of art or historical treasures are those with extraordinarily long
useful lives. Because of their cultural, aesthetic, or historical
value, the holder of the asset applies efforts to protect and preserve
the asset in a manner greater than that for similar assets without
such cultural, aesthetic, or historical value.
Technology Assets. Technology-related
assets are a class of capital assets that may require special treatment
and reporting by school districts based on local or state reporting
and accountability requirements or policies. Although technology
assets are not dissimilar from other capital assets such as vehicles
or furniture and fixtures, the resources dedicated to the installation
and ongoing support and use of technology by school districts have
resulted in an increased level of interest by policymakers and citizens
related to the use of resources dedicated to these purposes. Thus,
many school districts have instituted special accounting and reporting
practices associated with expenditures for technology-related assets.
To facilitate the proper accounting and reporting
of technology expenditures by school districts, chapter
6 (Account Classification Descriptions) of this handbook establishes
a number of expenditure and asset reporting codes. As chapter
6 outlines, school districts should account for technology-related
expenditures according to the following principles:
Using these codes to account for and report
on technology-related costs will allow school districts to
- Expenditures related to the technology and
media-related activities that support instruction (function code
2230) should be segregated from
those associated with administrative technology (function code
- Expenditures associated with purchased services
to support technology should be distinguished from other types
of purchased and professional services. Expenditure object codes
351 and 352
have been established for this purpose.
- Expenditures associated with the rental of
computer and other technology equipment should be distinguished
from other types of rentals. Expenditure object code 443 has been
established for this purpose.
- Communications expenditures should include
all costs associated with voice, data, and video communications
charges regardless of the media used (expenditure object code
- Technology supplies should be segregated from
other types of supplies. Expenditure object code 650 has been
established for this purpose.
- Purchases of technology capital equipment should
be specifically tracked for analysis purposes. Expenditure object
codes 734 and 735
have been established for this purpose.
Although chapter 6
addresses many of the key issues related to tracking and reporting
on technology-related costs, school districts will still need to establish
capitalization and depreciation policies for technology assets. School
districts should capitalize only those technology assets that meet
their local policies in this area. Non-capital technology purchases
should be treated as supplies for reporting purposes (use expenditure
object code 650).
- capture information on both instructional and
administrative technology costs and
- accumulate the total expenditures associated
with technology for operating purposes (expenditure object codes
and 650) and capital purchases
(expenditure object codes 734
Infrastructure Assets. Infrastructure
assets are long-lived capital assets that are normally stationary
in nature and that can be maintained for a significantly greater
number of years than most capital assets. Infrastructure assets
Parking lots and related lighting systems
may be defined by the entity as part of the associated building, rather
than as infrastructure. Most school districts have no or an immaterial
amount of infrastructure assets.
- drainage systems,
- water and sewer systems, and
- lighting systems.
Requirements.Infrastructure assets have several reporting
- Governmental entities are required to capitalize
and report major general infrastructure assets that were
acquired in fiscal years ending after June 30, 1980, or that received
major renovations, restorations, or improvements during that period.
Governments with revenues of less than $10 million (annually)
are not required to report their infrastructure assets retroactively.
- Prospective reporting of general infrastructure
assets is required for all entities at the date of implementation
of Statement 34.
- Statement 34 defines major general infrastructure
at the network or subsystem level on the basis of the following
- The cost or estimated cost of the subsystem
is expected to be at least 5 percent of the total cost of all
general capital assets reported in the first fiscal year ending
after June 15, 1999.
- The cost or estimated cost of the network is
expected to be at least 10 percent of the total cost of all general
capital assets reported in the first fiscal year ending after
June 15, 1999.
In determining when to implement the retroactive
infrastructure asset reporting requirements, governmental entities
should consider the value of any related debt that will be reflected
in the Statement of Net Assets.
- The reporting of nonmajor networks is encouraged,
but not required.
of Infrastructure Assets.Infrastructure assets are reported
at historical cost or estimated historical cost. If a determination
of the historical cost is not viable because of incomplete records,
an estimated historical cost may be determined in the following
Depreciation of Infrastructure Assets.GASB
Statement 34 allows two distinct approaches to reporting infrastructure
assets in the Statement of Net Assets. The standard approach requires
governmental entities to capitalize all major infrastructure assets
and depreciate them over their useful lives. This approach does not
differ from the accounting and reporting treatment of other types
of capital assets. Alternatively, entities may elect to use a modified
approach to infrastructure asset reporting under a specific set of
conditions. The modified approach allows governmental entities to
capitalize assets yet avoid the depreciation of their eligible infrastructure
assets if they meet two criteria:
- Using standard costing, which relies on available
records from the period of acquisition to estimate asset cost.
These records may include historical documents such as invoices
for similar assets and vendor catalogs from the acquisition period.
- Calculating the current replacement cost of
a similar asset and deflating this cost back by using price-level
indexes to the year or average year of acquisition. Refer to the
web site http://www.fhwa.dot.gov/programadmin/publicat.htm
for the Price Trends for Federal-Aid Highway Construction,
published by the U.S. Department of Transportation, Federal Highway
Administration, Office of Program Administration, Office of Infrastructure.
The modified approach is not limited to general
infrastructure assets, that is, infrastructure assets associated with
governmental activities. Eligible infrastructure assets of enterprise
funds that were previously depreciated may also be reported using
the modified approach.
- The entity has a qualifying asset management
- has an up-to-date inventory of infrastructure;
- performs consistent and complete condition
assessments every three years, the results of which are summarized
using a measurement scale; and
- can estimate, on an annual basis, the cost
to maintain and preserve the infrastructure assets at the
disclosed condition level.
- The entity documents that the eligible infrastructure
assets are being preserved approximately at or above a condition
level established and disclosed by the government.
If entities choose
the modified approach for reporting general infrastructure assets,
they are required to present information on condition and on estimated
versus actual maintenance as required supplementary information
If the governmental entities report eligible
infrastructure assets using the modified approach, additional schedules
and disclosures are required as RSI.
Entities should consult their external auditors
and the detailed disclosure requirements outlined in Statement 34
to determine policy decisions concerning the modified approach of
infrastructure asset reporting.
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