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M E M O R A N D U M
FROM: |
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DATE: |
February 13, 2001 |
SUBJECT: |
GASB 34—-Changes in Agency Capital Asset Systems and Policies Required by July 1, 2001 |
Agency capital asset systems that comply with the provisions
of Governmental Accounting Standards Board Statement No. 34
(GASB 34) for the fiscal year ended June 30, 2002, must be
operational as of July 1, 2001.
Accordingly, the Comptroller General’s Office asks all agencies
and component units, even those that already depreciate their assets, to
carefully review the new requirements outlined here.
The Comptroller General’s Office has prepared this document and its enclosures based on its current understanding of GASB 34. The Governmental Accounting Standards Board continues its ongoing process of interpreting the provisions of GASB 34 and issuing additional guidance when necessary. Upon clarification of authoritative guidance by the GASB, any subsequent changes will be communicated to agencies as quickly as possible.
Additionally, this document and its enclosures are not intended to address requirements relating to infrastructure. The Comptroller General’s Office will issue policies concerning infrastructure assets at a later date.
GASB 34[1] specifies the major classes of capital assets (formerly fixed assets) that the State must report in its Comprehensive Annual Financial Report. These classes are as follows: Land and Non-Depreciable Land Improvements, Depreciable Land Improvements, Buildings and Improvements, Vehicles, Machinery and Equipment, Works of Art and Historical Treasures, Infrastructure, Construction in Progress, and Intangible Assets. Your agency’s capital assets system must have the capability of reporting data in these specific asset categories effective July 1, 2001.
The State has changed its capitalization limits and related
policies effective July 1, 2001.
Most significantly:
1. |
All land and non-depreciable land improvements must be capitalized, regardless of cost; |
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2. |
The capitalization limit for depreciable land improvements, buildings and improvements, and intangible assets will be $100,000; and |
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3. |
The capitalization limit for machinery and equipment, vehicles, and works of art and historical treasures[2] will increase to $5000. |
The Government Finance Officers Association recently has encouraged governments to increase capitalization thresholds for equipment to $5,000. The Comptroller General’s Office believes that making this change in conjunction with the State’s GASB 34 implementation project will help to ease most agencies’ implementation of the significant changes in capital assets accounting that GASB 34 requires.
As has always been the case, agency directors will be responsible for maintaining appropriate controls over all agency assets, including items costing less than the capitalization limit. Agencies will be required to tag all movable assets between $1,000 and $5,000, and maintain a listing of these assets. The listing must include information such as tag number, description, location, and cost and must be made available upon request. No depreciation should be recorded on these assets as this listing is for control purposes only.
The remaining sections of this memorandum and its enclosures, except the one on capitalization limits, relate exclusively to capital assets with values greater than the above capitalization limits. As a result, some small agencies may no longer have any capital assets to report on year-end closing packages after fiscal year 2002 when they record the change to $5,000 for equipment.
Your agency’s capital assets system must have the capability of reporting the following data[3] within each asset category (with depreciable assets reported separately from non-depreciable assets):
1. |
Start-of-year and end-of-year balances, with accumulated depreciation presented separately from historical cost |
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2. |
Capital acquisitions |
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3. |
Sales or other dispositions |
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4. |
Current-period depreciation expense |
These requirements
apply to all fund types, including Enterprise and Internal Service Funds. Requirement (4) does not apply to
non-depreciable capital asset classes.
GASB 34 requires depreciation of assets previously recorded in the general fixed assets account group. This new requirement to record depreciation includes both current year depreciation and the calculation of accumulated depreciation as of July 1, 2001 (as if the assets had always been subject to depreciation).[4] Your agency’s capital assets system must be able to calculate current year depreciation expense and maintain accumulated depreciation balances effective July 1, 2001.
To assist your agency in implementing GASB 34 as it relates to capital assets other than infrastructure, the Comptroller General’s Office has prepared this packet containing the following documents:
1. |
“Capital Assets Other Than Infrastructure, Capitalization Limits Effective July 1, 2001” |
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2. |
“State of South Carolina Useful Lives for Depreciation of Capital Assets” |
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3. |
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4. |
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5. |
Use documents 1 through 3 to determine what items need to be capitalized and/or depreciated and to assign a useful life and depreciation method to those items that must be depreciated. Document 4 illustrates the information that GASB 34 requires for presentation in the financial statements and demonstrates the output required of your agency’s capital assets system. The final attachment explains how you can obtain an Excel spreadsheet model that shows how Excel could be used to maintain a capital assets listing and to provide the information shown on Document 4. All agencies, including those that currently maintain highly automated fixed assets systems, are strongly encouraged to review the design of the spreadsheet model as a step toward understanding the new system requirements.
Please contact Betsy Lawson by telephone at (803) 734-2617 or by e‑mail at blawson@cg.state.sc.us if you have any questions regarding the information contained in this packet. Thank you for your cooperation.
BCH:bg
Enclosures
2001-04-019 (CSFR)
[1]
See
Paragraphs 19, 20, 116, 117 of GASB 34.
[2] Not all works of art and historical treasures are required to be capitalized. See the document entitled Capitalization and Depreciation of Works of Art, Historical Treasures, and Similar Assets, Policies Effective July 1, 2001, that is included in this packet.
[3] See Paragraphs 116 and 117 and page 245 of GASB 34.
[4] See Paragraphs 20 through 22 and Paragraph 144 of GASB 34.