Governments often found it necessary to estimate the original costs of these assets on the basis of such documentary evidence as may be available, including price levels at the time of acquisition, and to record these estimated costs in the appropriate capital asset records. While this problem will diminish in size as governments retire or dispose of these assets with estimated costs, the notes to the financial statements should disclose the extent to which capital asset costs have been estimated and the method (or methods) of estimation. Similar consideration is made for the retroactive recording of infrastructure assets under GASBS 34.

Governments sometimes acquire capital assets by gift. When these assets are recorded, they should be recorded at their estimated fair value at the time of acquisition by the government. One of the most significant aspects of GASBS 34 is its definition of what is included in capital assets: land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure, and all other tangible and intangible assets that are used in operations and that have initial useful lives extending to more than one year. The GASB 34 Implementation Guide defines land improvements to consist of betterments, other than
building, that ready land for its intended use. Examples provided of land improvements include site improvements such as excavations, fill, grading, and utility installation; removal, relocation, or reconstruction of the property of others, such as railroads and telephone and power lines; retention walls; parking lots, fencing, and landscaping.

Included in the definition of capital assets are infrastructure assets. Previously, governments (not including proprietary funds) had the option of capitalizing infrastructure assets, and many, if not most, did not. (Infrastructure assets are defined by GASBS 34 as “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 are roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems.

Taken From : Governmental Accounting Made Easy

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