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General Capital Assets; General Long-Term Liabilities; Permanent Funds. Chapter 9. Learning Objectives. Understand how to maintain GCA & GLTL information for reporting purposes Understand how to account for transactions affecting GCA & GLTL

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General Capital Assets; General Long-Term Liabilities; Permanent Funds

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General capital assets general long term liabilities permanent funds l.jpg

General Capital Assets;General Long-Term Liabilities;Permanent Funds

Chapter 9

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Learning Objectives

  • Understand how to maintain GCA & GLTL information for reporting purposes

  • Understand how to account for transactions affecting GCA & GLTL

  • Understand how governmental funds and GCA & GLTL are related

  • Account for and report general infrastructure capital assets

  • Understand how to apply the modified approach to infrastructure capital assets

  • Understand GCA & GLTL financial reporting

  • Understand how to use, account for, & report Permanent Funds

  • Account for transactions affecting all Governmental Funds, GCA, & GLTL

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GCA & GLTL:What We’ve Seen Thus Far

  • General Capital Assets (GCA)

    • Purchases recorded as expenditures rather than fund assets

    • Sales recorded as Other Financing Sources (OFS)

  • General Long-Term Liabilities

    • Issuance of debt recorded as OFS

    • Retirement of debt recorded as expenditures or Other Financing Uses (OFU)

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GCA-GLTL Accounting Equation

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Characteristics of Capital Assets

  • Used in operations of the government (not for resale)

  • Have useful lives extending beyond a single reporting period (may be modified by government’s capitalization policy)

    May be tangible or intangible

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Land improvements



Building Improvements




Works of art

Historical treasures


Types of Capital Assets

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Capital Assets ≠ GCA

All general capital assets are capital assets, but not all capital assets are general capital assets!

  • GCA used by the Governmental Funds (general government)

  • Other capital assets are fund-specific: used by the Proprietary Funds and Trust Funds

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Initial Valuation

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Other Acquisition Methods

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Normal GCA Classifications(recommended by GFOA)

  • Land

  • Buildings or Buildings & Improvements

  • Infrastructure

  • Machinery & Equipment

  • Construction in Progress

  • Intangible Assets [added as a result of GASBS 51]

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Infrastructure Capital Assets

Long lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water & sewer systems, dams, & lighting systems.

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Capitalization Policy

  • Minimum dollar amount

  • Minimum useful life

    Whatever the government elects to do, it must be disclosed in the notes

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Reporting Works of Art& Historical Treasures

Not required to capitalize if all 3 criteria met

  • Collection is held for public exhibition, education, or research in furtherance of public service rather than financial gain

  • It is protected, kept unencumbered, cared for, and preserved

  • It is subject to policy that requires proceeds from sale to be used to acquire other items for collection

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Property system ID number

Serial number, etc.

Abbreviated description

Date of acquisition

Name and address of vendor

Payment voucher number

Fund and account from which purchased

Federal financing, if any

Cost or estimated cost

Estimated useful life & salvage value and annual depreciation

Accumulated depreciation

Department charged with custody


Date, method, and authorization of disposal

Minimum Information forProperty Records

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Other GCA Issues

  • Regular GCA inventory

  • Accounting for additions, betterments, and renewals

  • Depreciation and accumulated depreciation

  • Modified approach

    • Allowed only with infrastructure assets

    • No depreciation recorded

    • Only additions / improvements are capitalized

  • Updating GCA records

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GF acquisition

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Capital lease entry

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Capital Projects Fund – Chapter 7

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Acquired through foreclosure [Page 354]

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Acquired through gifts [Page 354]

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Recording depreciation [Page 354]

Sale of capital asset page 355 l.jpg

Sale of capital asset [Page 355]

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Retirement [Page 356]

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Intergovernmental Sale [Page 356]

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Intergovernmental Transfers

  • Within governmental funds

    • No journal entries required

    • GCA account adjusted for new location and responsibility

  • Between proprietary funds and governmental funds

    • Entry to remove (add) asset from (to) proprietary fund accounts

    • No entry in governmental funds

    • Record asset in GCA accounts

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Intergovernmental Transfer [Page 356]

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Significant (material)

Unexpected (not normal, not ordinary)

Decline in the service utility of a capital asset


Events or changes in circumstances that might be expected to occur during useful life

CA accounted for using the modified approach

Declines caused by deferred maintenance

Impairment of Assets

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Indicators of Impairment

  • Evidence of physical damage

  • Change in legal or environmental factors

  • Technological development or evidence of obsolescence

  • A change in the manner or expected duration of usage of an asset

  • Construction stoppage

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Measuring Impairments

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Restoration Cost Approach

Amount of impairment is derived from the estimated costs to restore the utility of the capital asset. The estimated restoration cost can be converted to historical cost either by restating the estimated restoration cost using an appropriate cost index or by applying a ratio of estimated restoration cost over estimated replacement cost to the carrying value of the capital asset.

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Service Units Approach

Isolates the historical cost of the service utility of the capital asset that cannot be used due to the impairment event or change in circumstances. The amount of impairment is determined by evaluating the service provided by the capital asset—either maximum estimated service units or total estimated service units throughout the life of the capital asset—before and after the event or change in circumstance.

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Deflated Depreciation Replacement Cost Approach

Replicates the historical cost of the service produced. A current cost for a capital asset to replace the current level of service is estimated. This estimated current cost is depreciated to reflect the fact that the capital asset is not new, and then is deflated to convert it to historical cost dollars.

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Reporting Impairment Losses

  • Temporary – no impairment loss report, but cost to repair is reported

    • Expenditure in Governmental Funds

    • Loss in Proprietary Funds

  • Other than temporary

    • Expenditure in Governmental Funds

    • Program expense, extraordinary item, or special item in Proprietary Funds and government-wide statements

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Reporting Insurance Recoveries

  • Governmental Funds – OFS or extraordinary item, as appropriate

  • Government-wide financial statements & Proprietary Funds – report restoration separate from impairment and associated insurance recovery

  • Impairment loss reported net of insurance recovery if both occur in same fiscal year

  • Insurance recovery in subsequent year reported as program revenue, nonoperating revenue, or extraordinary item, as appropriate

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Special Circumstances

  • Insurance recoveries for losses other than impairments:

    • Netted against loss if in same fiscal year

    • Program revenue, nonoperating revenue, or extraordinary revenue if in subsequent year

  • Self-Insurance

    • From ISF, report as described above

    • From General Fund, recovery is reported as

      • Reimbursement up to amount of loss

      • Transfer for any excess

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Reporting GCA

  • Financial Statements – governmental activities column of government-wide Statement of Net Assets

  • Notes to the Financial Statements

    • Beginning and Ending Balances of capital asset accounts and related accumulated depreciation accounts

    • Acquisitions of capital assets

    • Sales or other dispositions

    • Allocation of current period depreciation expense to each function in the Statement of Activities

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All unmatured long-term debt of the government except for that accounted for in a Proprietary Fund or Trust Fund


Bonds, warrants, & notes

Capital leases and CoPs

Underfunded pension plan contributions

Claims & judgments

Compensated absences

Landfill closure and post-closure care costs

General Long-Term Liabilities

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CPF–GLTL accounts [Page 364]

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DSF–GLTL accounts [Page 364]

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Special Circumstances

  • Serial Bonds

  • Special Assessment debt

  • Other governmental liabilities (details follow)

  • Interest related adjustments – reported in government-wide financial statements only

  • Defaulted bonds

  • In-substance defeasance

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Claims & Judgments [Page 366]

  • (1) To be paid from current financial resources.

  • (2) To be paid later (not from current financial resources).

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Capital Lease Payment [Page 367]

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Reporting GLTL

  • Financial Statements – governmental activities column of government-wide Statement of Net Assets

  • Notes to the Financial Statements

    • Beginning and Ending Balances of GLTL accounts

    • Issuances / increases in GLTL accounts

    • Retirements / decreases in GLTL accounts

    • Which governmental funds have typically been used in prior years to liquidate other long-term liabilities

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Permanent Funds

  • Used to account for resources held in trust by the government for the benefit of the government or of its citizenry as a whole

  • Contrast with Private Purpose Trust Fund where the assets are used to benefit private individuals, private organizations, or other governments

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Relationships Requiring Use of a Permanent Fund

  • Gift of real or personal property where

    • Principal is to remain intact

    • Earnings are to be used for certain purposes

  • Employee loan fund – principal could be reduced under certain circumstances

  • Other trust agreements

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#1 Donation received[Page 370]

2 purchase investments page 371 l.jpg

#2 Purchase investments[Page 371]

3 interest received on investments page 371 l.jpg

#3 Interest received on investments[Page 371]

4 sale of securities page 370 l.jpg

#4 Sale of securities[Page 370]

5 interest accrued page 370 l.jpg

#5 Interest accrued[Page 370]

6 transfer to gf page 370 l.jpg

#6 Transfer to GF[Page 370]

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Interfund – GCA – GLTLAccounting

1 issue debt page 372 l.jpg

#1 Issue debt [Page 372]

2 transfer bond premium page 372 l.jpg

#2 Transfer bond premium [Page 372]

3 contribution from gf to dsf page 373 l.jpg

#3 Contribution from GF to DSF[Page 373]

4 capital outlay recorded page 373 l.jpg

#4 Capital outlay recorded [Page 373]

5 remaining assets transferred page 373 l.jpg

#5 Remaining assets transferred [Page 373]

6 debt service payment page 373 l.jpg

#6 Debt service payment [Page 373]

7 capital lease pages 373 374 l.jpg

#7 Capital lease [Pages 373 – 374]

8 capital lease payment page 374 l.jpg

#8 Capital lease payment [Page 374]

9 government payment on special assessment page 374 l.jpg

#9 Government payment on special assessment [Page 374]

10 inspections on capital project performed page 374 l.jpg

#10 Inspections on capital project performed [Page 374]

11 reimbursement transaction page 375 l.jpg

#11 Reimbursement transaction [Page 375]

12 short term loan between funds page 375 l.jpg

#12 Short-term loan between funds[Page 375]

13 non current loan between funds page 375 l.jpg

#13 Non-current loan between funds[Page 375]

14 sale of computers page 375 l.jpg

#14 Sale of computers [Page 375]

15 sick leave accrual and payment page 376 l.jpg

#15 Sick leave accrual and payment [Page 376]

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