CHAPTER 7 Capital Assets
Governments often make significant investments in capital assets.
Capital assets are the long-lived assets that require significant investments of resources. They include the assets often referred to as infrastructure assets (roads, bridges, parks, etc.) as well as land, buildings, and equipment. The term is frequently used that the costs of certain assets are “capitalized.” This means that the costs at the time of purchase or construction are recorded as an asset on the statement of net assets or balance sheet rather than being charged to expense in the statement of activities or statement of revenues, expenses, and changes in fund balance.
This chapter will examine some of the more common accounting issues relating to capital assets. The topics discussed include the following:
• Where are capital assets recorded in the financial statements?
• Recording and valuing capital assets
• Understanding depreciation
• Using the modified approach in lieu of depreciating infrastructure assets
• The basics of capitalized interest
• Capital assets resulting from capital lease transactions
• Impairments of capital assets
Understanding these topics is of key importance in understanding a government’s financial statements. Statement No. 34 of the GASB resulted in some significant changes to the accounting
and reporting of capital assets, making capital assets a hot topic in the governmental accounting world.
WHERE ARE CAPITAL ASSETS RECORDED IN THE FINANCIAL STATEMENTS?
Answering this question requires distinguishing the recording of capital assets in the government-wide financial statements and in the fund financial statements.
Taken From : Governmental Accounting Made Easy