Under GASB Statement No. 34, state and local governments must report general capital assets — land, buildings, equipment, infrastructure, and similar long-lived tangible resources — on their government-wide Statement of Net Position at historical cost less accumulated depreciation, while continuing to treat their purchase as an expenditure in the fund financial statements.1Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.C: Necessity for General Capital Assets Reporting The rule produces two different pictures of the same purchase, and the notes to the statements are what tie them together.
What Counts as a General Capital Asset
General capital assets are the long-lived tangible resources a government uses for its primary activities. Each government sets its own capitalization threshold, the minimum dollar amount at which an item is tracked as an asset rather than expensed.2National Center for Education Statistics. NCES Chapter 5: Capitalization Thresholds and Estimated Useful Lives Items below the threshold are treated as regular expenses.
For reporting, these assets are typically grouped into major classes:3Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.E: Recording General Capital Assets
- Land and land improvements
- Buildings and building renovations
- Machinery and equipment
- Infrastructure, such as roads and bridges
- Library books
- Construction in progress
Later spending on an existing asset is handled by its character. Major renovations that extend an asset’s life or expand its capacity are added to the asset’s recorded value. Normal repairs and routine maintenance that do not materially add value are expensed in the year they occur.4Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.F: Valuation of Capital Assets
How to Value Them
Capital assets are recorded at historical cost. That cost includes the purchase price plus the additional charges needed to put the asset into service, such as transportation, professional fees, and site preparation.5Indiana State Board of Accounts. Indiana SBOA FAQ – Value of Donated Capital Assets
When original records for older assets are not available, the standard permits an estimated historical cost. The estimate has to come from a systematic method, such as applying price indexes to approximate what the asset would have cost at the time of acquisition.4Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.F: Valuation of Capital Assets
Donated assets follow a different rule. They are recorded at their fair value on the date received, meaning the price the government would have paid in an open market for an asset with the same service potential.5Indiana State Board of Accounts. Indiana SBOA FAQ – Value of Donated Capital Assets
Depreciation and the Modified Approach for Infrastructure
On the government-wide statements, most capital assets must be depreciated over their estimated useful lives. Spreading the cost this way shows whether current revenues are covering the actual cost of the services being provided.6Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.J: Depreciation and Modified Approach
A few categories are not depreciated:6Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.J: Depreciation and Modified Approach
- Land and certain land preparation costs
- Library books
- Construction in progress
- Infrastructure assets reported using the modified approach
The modified approach is the alternative GASB 34 offers for infrastructure networks such as roads or bridges. A government that uses it reports actual maintenance costs as expenses instead of depreciation. To qualify, the government must run an asset management system that keeps a current inventory and performs condition assessments at least every three years.7Federal Reserve Bank of Chicago. Chicago Fed Letter No. 184c – Infrastructure Asset Management It must also document that the assets are being preserved at or above a condition level it has publicly disclosed.6Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.J: Depreciation and Modified Approach
Where General Capital Assets Appear in the Financial Statements
The government-wide Statement of Net Position lists capital assets at historical cost less accumulated depreciation.1Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.C: Necessity for General Capital Assets Reporting The fund financial statements do not. Because those statements measure only current financial resources, the purchase of a capital asset shows up as a capital outlay expenditure in the year it is paid for.8National Center for Education Statistics. NCES Chapter 5: Reporting of Expenditures
The notes to the financial statements have to fill in detail for each major class of asset:9National Center for Education Statistics. NCES Chapter 5: Required Disclosures about Capital Assets
- Beginning and ending balances
- Acquisitions during the year, and assets sold or disposed of
- Accumulated depreciation
Governments using the modified approach have additional required supplementary information to provide: schedules of the most recent condition assessments and a comparison of estimated maintenance needs against actual maintenance spending.10Office of the New York State Comptroller. NY OSC Chapter II – Section 4.C: Cash and Basic Financial Statements
A reconciliation ties the two sets of statements together. It explains why, for example, the purchase of a building is an expenditure in the fund statements but a long-term asset in the government-wide statements.11California Department of Education. GASB 34 New Financial Reporting Requirements Without that reconciliation, the two views of the same transactions would not line up for the reader.