Reporting Infrastructure and Other Longlived Assets

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• Reporting Infrastructure and Other Long-lived
  Assets
• Governmental Accounting
• LBJ School of Public Affairs
• Presented by John Reynolds, CPA
• February 13, 2007

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Contact Information

• John Reynolds, CPA
• First Assistant Bexar Co. Auditor
• Phone
• 210-335-2542
• Email
• jreynolds_at_bexar.org

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What We Will Cover

• Definitions
• Infrastructure
• Roads and Bridges
• Rights-of-Way
• Depreciation of Capital Assets
• Reporting of Capital Assets
• Valuation of Capital Assets
• Capital Asset Policies
• Questions and Answers

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Definitions

• Capital Assets
• Specific Fund vs General Capital Assets
• Infrastructure
• Major infrastructure Assets
• Class of Assets
• Networks
• Subsystems of Networks

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Infrastructure Prospective

• All Phases must report infrastructure
  prospectively from date of GASB 34
  Implementation.
• Calculate accumulated depreciation up to
  beginning of year, and
• Compute annual depreciation from then on.

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Infrastructure Retroactive

• 1999 revenues determine reporting phase
• Phase 1 2 governments must report major
  infrastructure assets retroactively
• Phase 1 2 have up to 4 years from date of
  implementation deadline for other GASB 34
  requirements (FY beginning after 6-15-07)
• Phase 3 does not have to report retroactively.

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Retroactive Reporting Requires

• Computing Historical Cost
• Calculating Accumulated Depreciation
• Calculating Annual Depreciation
• i.e. Reporting capital assets net of accumulated
  depreciation

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Other General Capital Assets

• All Phases must report all non-infrastructure
  assets in the year of implementing GASB 34.
• Compute accumulated depreciation to the beginning
  of the year, and
• Compute annual depreciation from then on.

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Depreciation of Capital Assets

• Do not depreciate Land
• Depreciate capital assets over their useful lives
• No change for Proprietary Fiduciary
• Values should already be available for
  Non-infrastructure GCA, but
• Will need to compute Accumulated Depreciation

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Depreciating Infrastructure

• Modified Approach
• System Requirements
• Maintenance Requirements
• Affects only depreciation, still must compute
  retroactively if required
• Failure to meet system or maintenance
  requirements will require you to depreciate

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Depreciating Infrastructure

• Phase 1 2 report depreciation and A/D on major
  systems and improvements since June 1980.
• no later than 4 years after implementation
  deadline for GASB 34
• All phases report depreciation for all GCA
  including infrastructure from date of
  implementation of GASB 34 forward (prospectively)

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Reporting Capital Assets

• Statement of Net Assets
• Statement of Activities (Depreciation)
• In expense column
• Allocate by function
• Depreciation on shared assets
• Depreciation on courthouse
• Depreciation on infrastructure

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Reporting Capital Assets

• Individual Fund Statements
• No Change (Proprietary and Fiduciary Funds still
  report depreciation and Governmental Funds do
  not)
• Management Discussion and Analysis (MDA)
• Description of significant asset activity
• Current and LT equipment leases
• Explanation of Capital Asset Policies

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Reporting Capital Assets

• Notes to Financial Statements
• Beginning and ending balances
• Acquisitions
• Sales or Other Dispositions
• Current Depreciation and allocation by Function

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Acquisition Valuation

• Purchase Cost
• Construction Cost
• Donation or Gift Fair Value at date of donation
• Capital Lease present value of future lease
  payments plus down payment, or cash price

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Cost

• Historical Cost
• Estimated Historical Cost
• Methods for estimating historical cost
• Current Replacement Cost Deflated to Year of
  Acquisition
• Estimates based on other documents
• Published prices for comparable equipment

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Estimating Historical Cost

• GASB 34 is flexible especially for retroactive
  reporting
• May use any approach that complies with the
  intent of this Statement.
• Review Computing the value of City and County
  Roads and Bridges

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Capital Improvements

• Must extend useful life significantly
• Cost a substantial amount in relation to the
  original asset
• Are tracked and depreciated separately
• Are necessary in determining gain or loss on sale
  and for insurance purposes
• Otherwise they s/b reported as RM

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Criteria for Roads Bridges

• Improvements
• Upgrade surface type
• Expand Capacity ( of lanes, load rating)
• Straighten curves
• Replace surface from the base up
• Resealing is maintenance

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RIGHT-OF-WAY

• Do not depreciate unless just a right was
  purchased and has an expiration date
• Donation by developers
• Record road and right-of-way separately
• Prescriptive easement
• Purchases recorded at cost donations at fair
  market value.

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Asset Policies

• Capitalization Policy
• Valuation Methodologies
• Useful Lives
• Depreciation Methods
• Depletion and Amortization??
• Criteria for determining Improvements
• Capitalization Thresholds

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Capitalization Thresholds
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Asset Accountability Policy

• Assign employee accountability for
• each capital asset, and
• selected types of non-capital assets
• Inventory System
• Unique identifying number
• Tagging, employee accountability cards

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Asset Accountability Policy

• Physical Inventories
• Maintenance of inventory records separate from
  accounting records
• Policy for reimbursements
• Policy for lost or stolen items

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Accounting Policies

• Policy for allocating depreciation
• Policy for recognizing gain or loss
• Policy and procedures for reconciling general
  control accounts to detail inventory records

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Questions???
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THIS ROAD GOES ON FOREVER, AND THE PARTY WILL
NEVER END (Robert Earl Keen)

• Reporting Infrastructure and Other Long-lived
  Assets
• Governmental Accounting
• LBJ School of Public Affairs
• Presented by John Reynolds, CPA
• February 7, 2006