One of the biggest challenges with capitalizing roads is how to determine the historical and/or estimated historical costs of these assets. Many county-owned roads have been maintained in the county for decades, or even more then a century, and have changed over time from a simple dirt road to a multiple-lane asphalt road with  numerous upgrades and courses of maintenance.   

The GASB considered this accounting challenge when it implemented Statement 34  and requires that counties retroactively report roads at actual or estimated  historical cost only back to—

• Those acquired on or after July 1, 1980 or,
• The last time the road was upgraded (gravel to oil-and-chip, etc.) or,
• The last time the road was replaced or resurfaced in a way that it extended the original useful life of the road (i.e. not considered routine maintenance).

Example 1:
Blue County is trying to determine the historical cost for Turkey Town Road (a  county-owned gravel road). The road has been a gravel road for at least 50 years.  Every year, the county grades the road a couple times and drops a few loads of gravel (less than $100) on it for annual maintenance. As this road does not meet any  of the requirements for capitalization (date acquired, no upgrades, only routine maintenance performed), county management chose not to capitalize this road.

Example 2:
Grey County is trying to determine the historical cost for Short Mountain Road (a  county-owned oil-and-chip road). The road has existed for more than a hundred  years. However, the road was gravel until 1994, when it was upgraded to oil-and-chip. Since this was the last major work project on this road, the county would  determine an estimated historical cost (if actual cost was not known) for the cost of  an oil-and-chip road and capitalize this amount as the road’s cost with the  acquisition date of the road being 1994 (when it was upgraded).

Example 3:
Black County is trying to determine the historical cost for Biven’s Hill Road (a  county-owned asphalt road). The road has been an asphalt road for a number of  years, however the road was resurfaced three years ago during a large repaving  project. The original historic cost of the road would be determined at the time of  resurfacing if the project extended the useful life of the road and was not considered  routine maintenance. The original acquisition date for the road would be the date of  this last major resurfacing.

Often when new subdivisions are finished, the roads within the subdivision are brought up to county road standards and donated to the county. The capitalization cost of these roads should be the actual or estimated fair value of the roads at the  time of donation. If the developer refuses to disclose the cost of the roads, the GASB  has determined that a county can use an accurate estimate (based on comparable road construction costs) for the value of the donated infrastructure. Management should be cautious if they use a cost estimate provided by a road builder not to include the builder’s profit margin into the cost estimate for a donated road.