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

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

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Slide 1

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

Chapter 9

Slide 2

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

Slide 3

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)

Slide 4

GCA-GLTL Accounting Equation

Slide 5

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

Slide 6


Land improvements



Building Improvements




Works of art

Historical treasures


Types of Capital Assets

Slide 7

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

Slide 8

Initial Valuation

Slide 9

Other Acquisition Methods

Slide 10

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]

Slide 11

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.

Slide 12

Capitalization Policy

  • Minimum dollar amount

  • Minimum useful life

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

Slide 13

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

Slide 14

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

Slide 15

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

Slide 16

GF acquisition

Slide 17

Capital lease entry

Slide 18

Capital Projects Fund – Chapter 7

Slide 19

Acquired through foreclosure [Page 354]

Slide 20

Acquired through gifts [Page 354]

Slide 21

Recording depreciation [Page 354]

Slide 22

Sale of capital asset [Page 355]

Slide 23

Retirement [Page 356]

Slide 24

Intergovernmental Sale [Page 356]

Slide 25

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

Slide 26

Intergovernmental Transfer [Page 356]

Slide 27


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

Slide 28

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

Slide 29

Measuring Impairments

Slide 30

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.

Slide 31

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.

Slide 32

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.

Slide 33

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

Slide 34

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

Slide 35

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

Slide 36

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

Slide 37


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

Slide 38

CPF–GLTL accounts [Page 364]

Slide 39

DSF–GLTL accounts [Page 364]

Slide 40

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

Slide 41

Claims & Judgments [Page 366]

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

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

Slide 42

Capital Lease Payment [Page 367]

Slide 43

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

Slide 44

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

Slide 45

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

Slide 46

#1 Donation received[Page 370]

Slide 47

#2 Purchase investments[Page 371]

Slide 48

#3 Interest received on investments[Page 371]

Slide 49

#4 Sale of securities[Page 370]

Slide 50

#5 Interest accrued[Page 370]

Slide 51

#6 Transfer to GF[Page 370]

Slide 52

Interfund – GCA – GLTLAccounting

Slide 53

#1 Issue debt [Page 372]

Slide 54

#2 Transfer bond premium [Page 372]

Slide 55

#3 Contribution from GF to DSF[Page 373]

Slide 56

#4 Capital outlay recorded [Page 373]

Slide 57

#5 Remaining assets transferred [Page 373]

Slide 58

#6 Debt service payment [Page 373]

Slide 59

#7 Capital lease [Pages 373 – 374]

Slide 60

#8 Capital lease payment [Page 374]

Slide 61

#9 Government payment on special assessment [Page 374]

Slide 62

#10 Inspections on capital project performed [Page 374]

Slide 63

#11 Reimbursement transaction [Page 375]

Slide 64

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

Slide 65

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

Slide 66

#14 Sale of computers [Page 375]

Slide 67

#15 Sick leave accrual and payment [Page 376]

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