RECORDING AND VALUING CAPITAL ASSETS (3)
It is relatively easy for governments to ascertain the costs of capital assets that are purchased currently. Contracts, purchase orders, and payment information is available to determine the acquisition or construction costs. Again, the cost of a capital asset includes not only its purchase price or construction cost, but also whatever ancillary charges are necessary to place the asset in its intended location and in condition for its intended use. Thus, among the costs that should be capitalized as part of the cost of a capital asset are the following:
• Professional fees, such as architectural, legal, and accounting fees
• Transportation costs, such as freight charges
• Legal claims directly attributable to the asset acquisition
• Title fees
• Closing costs
• Appraisal and negotiation fees
• Surveying fees
• Damage payments
• Land preparation costs
• Demolition costs
• Insurance premiums during the construction phase
• Capitalized interest (discussed later in this chapter)
The reporting of capital assets by governments was not always common. As governments worked to adopt the requirements of early GAAP for governments, they were faced with the task of establishing capital asset records and valuation after many years of financial reporting without them. In these situations, many of the supporting documents and records that might contain original cost information were no longer available to establish the initial cost of these previously unrecorded assets.
Taken From : Governmental Accounting Made Easy