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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. 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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General capital assets general long term liabilities permanent funds l.jpgSlide 1

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

Chapter 9

Learning objectives l.jpgSlide 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

Gca gltl what we ve seen thus far l.jpgSlide 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)

Gca gltl accounting equation l.jpgSlide 4

GCA-GLTL Accounting Equation

Characteristics of capital assets l.jpgSlide 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

Types of capital assets l.jpgSlide 6

Land

Land improvements

Easements

Buildings

Building Improvements

Vehicles

Machinery

Equipment

Works of art

Historical treasures

Infrastructure

Types of Capital Assets

Capital assets gca l.jpgSlide 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

Initial valuation l.jpgSlide 8

Initial Valuation

Other acquisition methods l.jpgSlide 9

Other Acquisition Methods

Normal gca classifications recommended by gfoa l.jpgSlide 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]

Infrastructure capital assets l.jpgSlide 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.

Capitalization policy l.jpgSlide 12

Capitalization Policy

  • Minimum dollar amount

  • Minimum useful life

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

Reporting works of art historical treasures l.jpgSlide 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

Minimum information for property records l.jpgSlide 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

Location

Date, method, and authorization of disposal

Minimum Information forProperty Records

Other gca issues l.jpgSlide 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

Gf acquisition l.jpgSlide 16

GF acquisition

Capital lease entry l.jpgSlide 17

Capital lease entry

Capital projects fund chapter 7 l.jpgSlide 18

Capital Projects Fund – Chapter 7

Acquired through foreclosure page 354 l.jpgSlide 19

Acquired through foreclosure [Page 354]

Acquired through gifts page 354 l.jpgSlide 20

Acquired through gifts [Page 354]

Recording depreciation page 354 l.jpgSlide 21

Recording depreciation [Page 354]

Sale of capital asset page 355 l.jpgSlide 22

Sale of capital asset [Page 355]

Retirement page 356 l.jpgSlide 23

Retirement [Page 356]

Intergovernmental sale page 356 l.jpgSlide 24

Intergovernmental Sale [Page 356]

Intergovernmental transfers l.jpgSlide 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

Intergovernmental transfer page 356 l.jpgSlide 26

Intergovernmental Transfer [Page 356]

Impairment of assets l.jpgSlide 27

Defined

Significant (material)

Unexpected (not normal, not ordinary)

Decline in the service utility of a capital asset

Excludes

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

Indicators of impairment l.jpgSlide 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

Measuring impairments l.jpgSlide 29

Measuring Impairments

Restoration cost approach l.jpgSlide 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.

Service units approach l.jpgSlide 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.

Deflated depreciation replacement cost approach l.jpgSlide 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.

Reporting impairment losses l.jpgSlide 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

Reporting insurance recoveries l.jpgSlide 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

Special circumstances l.jpgSlide 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

Reporting gca l.jpgSlide 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

General long term liabilities l.jpgSlide 37

Defined

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

Examples

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

Cpf gltl accounts page 364 l.jpgSlide 38

CPF–GLTL accounts [Page 364]

Dsf gltl accounts page 364 l.jpgSlide 39

DSF–GLTL accounts [Page 364]

Special circumstances40 l.jpgSlide 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

Claims judgments page 366 l.jpgSlide 41

Claims & Judgments [Page 366]

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

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

Capital lease payment page 367 l.jpgSlide 42

Capital Lease Payment [Page 367]

Reporting gltl l.jpgSlide 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

Permanent funds l.jpgSlide 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

Relationships requiring use of a permanent fund l.jpgSlide 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

1 donation received page 370 l.jpgSlide 46

#1 Donation received[Page 370]

2 purchase investments page 371 l.jpgSlide 47

#2 Purchase investments[Page 371]

3 interest received on investments page 371 l.jpgSlide 48

#3 Interest received on investments[Page 371]

4 sale of securities page 370 l.jpgSlide 49

#4 Sale of securities[Page 370]

5 interest accrued page 370 l.jpgSlide 50

#5 Interest accrued[Page 370]

6 transfer to gf page 370 l.jpgSlide 51

#6 Transfer to GF[Page 370]

Interfund gca gltl accounting l.jpgSlide 52

Interfund – GCA – GLTLAccounting

1 issue debt page 372 l.jpgSlide 53

#1 Issue debt [Page 372]

2 transfer bond premium page 372 l.jpgSlide 54

#2 Transfer bond premium [Page 372]

3 contribution from gf to dsf page 373 l.jpgSlide 55

#3 Contribution from GF to DSF[Page 373]

4 capital outlay recorded page 373 l.jpgSlide 56

#4 Capital outlay recorded [Page 373]

5 remaining assets transferred page 373 l.jpgSlide 57

#5 Remaining assets transferred [Page 373]

6 debt service payment page 373 l.jpgSlide 58

#6 Debt service payment [Page 373]

7 capital lease pages 373 374 l.jpgSlide 59

#7 Capital lease [Pages 373 – 374]

8 capital lease payment page 374 l.jpgSlide 60

#8 Capital lease payment [Page 374]

9 government payment on special assessment page 374 l.jpgSlide 61

#9 Government payment on special assessment [Page 374]

10 inspections on capital project performed page 374 l.jpgSlide 62

#10 Inspections on capital project performed [Page 374]

11 reimbursement transaction page 375 l.jpgSlide 63

#11 Reimbursement transaction [Page 375]

12 short term loan between funds page 375 l.jpgSlide 64

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

13 non current loan between funds page 375 l.jpgSlide 65

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

14 sale of computers page 375 l.jpgSlide 66

#14 Sale of computers [Page 375]

15 sick leave accrual and payment page 376 l.jpgSlide 67

#15 Sick leave accrual and payment [Page 376]


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