Capital Assets

While Statement 34 does not give a complete definition of a capital asset, capital  assets can be defined as major assets that benefit more than a single fiscal period. Capital assets include items such as land, land improvements, buildings, building  improvements, construction-in-progress, vehicles, and equipment.

 A county is responsible for capitalizing all county-owned assets above the  capitalization threshold determined by the county’s written capital asset policy.  Creating and maintaining an accurate capital asset management systemis one of the more time-consuming responsibilities for achieving GASB 34 compliance.  With this in mind, county management must be responsible for providing adequate time, personnel, and resources dedicated to achieving this compliance.   

Counties are required to prepare capital asset reports at least annually. These  reports present capital assets and infrastructure by function (the description  account as defined in the state uniform chart of accounts) and asset type (i.e. land,  construction-in-progress, buildings and improvements infrastructure, and other  assets). These reports should present all of the county’s assets and infrastructure over a certain capitalization threshold, as well as the corresponding annual depreciation expense and accumulated depreciation for these assets. These reports are to be accurately prepared at the end of each fiscal year in a timely manner. Data from these reports will be included in the county’s annual audited financial  statements. Two required capital asset reports (by classification and  by function and activity) Examples. It is important to become  familiar with these two sample reports because the county’s government-wide  financial statements cannot be prepared until these reports can be generated  accurately.

The first and possibly the most important step to creating and maintaining an  accurate and complete asset management system is for a county to adopt a written capital asset policy. The policy should be descriptive enough that an auditor (or other individual who did not create the asset management system) would be able to  read the policy and verify that the county had capitalized and maintained its capital  assets in accordance with its adopted policy. While it is a good idea to acquire a copy of a capital asset policy from another county (one that has already complied with  GASB 34) to have a “rough draft” for your own policy, a county should not merely copy another county’s capital asset policy—asset management will differ from  county to county. Sample capital asset policy. This sample  policy is a compilation of best practices from numerous Tennessee counties that have  complied with GASB Statement 34 and can be used as a “rough draft” for your  county’s policy.

Once a county adopts a capital asset policy for use, it is imperative that the county’s asset management system is implemented and maintained  in accordance with its adopted policy.

A written capital asset policy, at a minimum, should address the following:  

a. Capitalization thresholds
b. Depreciation methods and rates
c. Procedures to identify existing capital assets and infrastructure
d. Methods to determine historical costs or estimated historical costs
e. Procedures to tag and track movable assets
f. Procedures to maintain capital assets records on a current basis
g. Procedures for recording new/donated/transferred/disposed of assets
h. Identification of available software to account for capital assets