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1. Capital Asset Reporting GASB Statement 34 AASHTO Peer Conference
Jay Fountain--GASB Staff
April 25, 2001
The views expressed in this presentation are those of Mr. Fountain. Official positions of the GASB are determined only after extensive due process and deliberation by the GASB.
2. Basic Financial Statements and MD&A--Statement 34
3. Statement 34 Requirements MD&A
Government-wide financial statements
Statement of net assets
Statement of activities
Fund financial statements
Note disclosures
Required supplementary information (RSI)
4. Introduction to Statement 34 Effective Dates
9. WHAT NEEDS ARE THE GOVERNMENT-WIDE STATEMENTS ARE TRYING TO MEET? Data About Governmental Activities and Business-Type Activities as a Whole
Periodic Costs of Services
Sufficiency of Revenues
Financial Position
10. Statement 34 Q&A 290 Q & A’s
Standard Section
Over 50 Illustrative
Financial Statements
10 “How to”
exercises
Topical Index
12. Early Implementers--Other Colleges and Universities
Oakton Community College, Illinois—CAFR (Adobe Acrobat Reader required)
Counties
East Carroll Parish Police Jury, Louisiana—FS (Adobe Acrobat Reader required)
Other Local Governments
Village of Wilson, Louisiana—CAFR (Adobe Acrobat Reader required)
13. Early Implementers--Other School Districts
Berea City School District, Ohio—CAFR (Adobe Acrobat Reader required)
NEW—Genesee Intermediate School District, Flint, Michigan—CAFR (Adobe Acrobat Reader required)
NEW—Iberville Parish School Board, Louisiana
NEW—School District of Kettle Moraine, Wales, Wisconsin
Vernon Parish School Board, Louisiana—CAFR (Adobe Acrobat Reader required)
14. Early Implementers--Other Special-purpose Governments
Albany County Airport Authority, New York
Douglasville-Douglas County Water and Sewer Authority, Georgia—MD&A, financial statements, notes and RSI (Adobe Acrobat Reader required)
South Shore Tri-Town Development Corporation (Weymouth, MA)
19. What are the Elements in the New Model? Management’s Discussion and Analysis
Government-Wide Statements
Two new financial statements
Statement of Net Assets
Statement of Activities
Full accrual and economic resources
All capital assets including infrastructure reported
Fund Statements--Major funds, reconciliation
Restricted use of trust & agency funds
EWP--Total economic resources
MD&A Transmittal letter--forward looking
original budget--RSI
EWP--Total economic resources
MD&A Transmittal letter--forward looking
original budget--RSI
20. Capital Asset Reporting Requirements All general capital assets (including infrastructure assets) must be reported in the government-wide statements
General capital assets (with depreciation) at effective date of Statement 34
Infrastructure assets prospective at effective date, retroactive assets after transition period
21. Support for reporting capital assets
Necessary when statements report economic resources and financial position
Inclusion of debt without corresponding assets would distort financial position
Needed for measuring “interperiod equity”
Essential for measuring “cost of services”
Represents major investment and commitment to future services
Why Report Capital Assets
22. Provisions in Statement 34 After reviewing responses, public hearings, focus groups results, and objectives of financial reporting, Board voted to require the reporting of capital assets and infrastructure assets with:
Transition period--Infrastructure assets
Transition provisions--Infrastructure assets
Modified approach--Infrastructure assets
23. Capital Assets Reporting Definition
tangible or nontangible assets used in operations
initial useful life extends beyond single reporting period
includes:
- land - improvements to land
- vehicles - buildings
- machinery - building improvements
- equipment - works of art and historical treasures
- easements - infrastructure
24. Reporting Capital Assets on the Financial Statements Some examples of where and what will be reported
30. Definition of Infrastructure For this statement, infrastructure assets are:
Long-lived capital assets that are a part of a network of assets that can have service potential for an extended period
Normally stationary
Examples
Roads and bridges, dams, water and sewer systems
Buildings generally NOT classified as infrastructure unless part of an infrastructure system
31. Capital Asset Reporting Requirements
Report at historical cost (or at fair value or estimated historical cost in certain cases)
capitalized interest
ancillary charges necessary to place asset into its intended location and condition for use
Depreciate over estimated useful lives, except inexhaustible assets, historical treasures, and infrastructure if modified approach is used
May group assets
May use composite method of depreciation
Provisions in Statement 34
32. Capital Assets Reporting Infrastructure
must report new infrastructure assets at time of Statement 34 implementation
proprietary funds and special purpose (business-type) governments must report all infrastructure assets at time of implementation
General governmental infrastructure previously acquired has special transition provisions and period
33. Capital Assets Reporting Valuing Capital Assets
reported at historical cost
cost includes:
capitalized interest (prospective)
ancillary charges necessary to place asset into its intended location and condition for use
donated items reported at estimated fair value at time of acquisition plus ancillary charges
Look carefully at capitalization thresholds
34. Capital Assets Reporting Depreciation
reported net of accumulated depreciation
not all are depreciable
inexhaustible capital assets
infrastructure assets reported using modified approach
Remember to consider value at end of estimated life
Governments may use any established depreciation method
35. Statement 34 Does Not Does not -- For historical cost depreciation
Specify or dictate capitalization policies
Establish estimated useful lives for depreciation
Require use of a specific depreciation method
Does not -- For modified approach
Specify a condition at which assets must be preserved
36. Transition for Infrastructure Reporting Transition Accommodations
staggered transition dates--next slide
look-back period time limited--additions and improvements after June 15, 1980
look-back limited to major assets--standard defines
reporting nonmajor assets not required
historical cost may be estimated--for example, may use estimated current cost and deflate to estimated year of acquisition or last major improvement
37. Transition for Infrastructure Reporting staggered transition dates
38. Depreciation--if used May use any established method
May calculate by class, network, subsystem, or individual asset
May use composite methods
39. Modified Approach for Infrastructure Reporting Infrastructure assets that are part of a network or subsystem of a network are not required to be depreciated as long as the government:
manages the eligible infrastructure assets using an asset management system, and
documents that the eligible infrastructure assets are being preserved approximately at a condition level established by the government
40. Modified Approach for Infrastructure Reporting Acceptable asset management system will:
present an up-to-date inventory
perform condition assessments of the assets and summarize the results using a measurement scale
estimate each year the annual amount to maintain and preserve the assets at the condition level established and disclosed by the government
41. Modified Approach for Infrastructure Reporting Governments should document that:
Complete condition assessments are performed in a consistent manner at least every 3 years
The results of the 3 most recent complete condition assessments indicate that asset is being maintained/preserved approximately at or above the established condition level
42. Documentation the network is being preserved at a certain condition level May require professional judgment because of variations among governments in their infrastructure assets, asset management systems, established condition levels, and condition assessment methods. These factors may also vary within a government’s different networks.
43. Modified Approach - Reporting Statement of Net Assets
Additions and improvements to infrastructure assets are capitalized
No accumulated depreciation
Statement of Activities
Expenditures made to preserve the life of infrastructure assets are expensed
No depreciation expense reported
44. Modified Approach for Infrastructure Reporting Required Supplementary Information for Modified Approach
Infrastructure assets reported according to the modified approach should disclose:
The assessed condition for at least the 3 most recent complete condition assessments, indicating the dates of the assessments
The estimated annual amount to maintain and preserve at the established condition level compared to the amounts actually expensed for the current and past 4 reporting periods
45. Modified Approach for Infrastructure Reporting RSI for Modified Approach
Infrastructure assets reported according to the modified approach should disclose (con’t):
Basis for the condition measurement and the measurement scale
The condition level at which the government intends to preserve its infrastructure assets
Factors that significantly affect trends in the information reported
46. Infrastructure assets reported according to the modified approach should disclose:
1. The assessed condition
performed at least every 3 years
for at least the 3 most recent complete condition assessments
indicating the dates of the assessments
RSI for Modified Approach
47. RSI for Modified Approach
49. Transition Provisions for Infrastructure Assets Prospective reporting only at effective date of Statement 34
Capitalize improvements, additions and acquisitions and begin depreciation
If “modified approach is to be used--expense preservation; otherwise capitalize
May report on portion (network level) of retroactive infrastructure assets
50.
Ken Schermann Randy Finden
(203) 847-0700 (ext. 206) ext. 240
krschermann@gasb.org rjfinden@gasb.org
Jay Fountain Roberta Reese
(203) 847-0700 (ext. 259) ext. 324
jrfountain@gasb.org rereese@gasb.org