Capital assets and GASB reporting are vital to responsible financial management, enabling long-term planning, fostering public trust, and supporting informed decisions. However, capital asset management remains one of the most challenging areas of governmental accounting. This article reframes GASB 34 in a practical context to provide clarity and best practices.
GASB 34: A Shift in Reporting
GASB 34 shifted governmental reporting by bringing in long‑term investments. Financial statements must show:
- What a government owns,
- How old those assets are, and
- How much useful life remains.
This is an ongoing process affected by turnover, missing documentation, and unrecorded activity, which can affect accuracy.
A capital asset is generally defined as an item with a useful life exceeding one year, meeting the established capitalization threshold, and used for governmental operations. Examples include land, buildings, infrastructure, vehicles, equipment, and certain technology. Comparing capital asset values to insurance values can cause confusion, because historical costs do not equal replacement costs, which serve different purposes.
The capitalization threshold plays an important role in balancing workload, accuracy, and audit risk. When thresholds are set too low, staff spend time tracking items that have little effect on reporting. When thresholds are set too high, assets that should be captured may be excluded. Governments nationwide are reassessing thresholds to better reflect current costs, staff resources, and reporting priorities. Consistency and clear documentation are essential.
Inventory and inspection ensure capital asset records are accurate. An effective inventory confirms that assets exist, are located where expected, and remain in service. The most effective approach is one that can be completed consistently, whether annually, biennially, or on a rolling schedule. Both internal staff and external specialists can conduct inventory, depending on capacity and the need for independence.
Useful lives reflect expected service life based on maintenance practices, actual use, and operational experience. They influence depreciation, net book value, and long‑term financial trends. Periodic reviews improve reporting accuracy; auditors favor current, well-supported assumptions.
Additions should reflect the full cost of placing the asset into service, including related fees and preparations. Disposals can be missed when departments trade, scrap, or replace items without communicating changes. Additions and disposals that are recorded late or incompletely are common sources of error. A simple, consistent disposal process greatly reduces risk and audit concerns.
Grouped or pooled assets can be useful when multiple lower‑cost items form a material purchase. This approach simplifies tracking but limits visibility into individual items, requiring organized asset grouping, proper depreciation, and monitoring for losses or turnover. The goal is to simplify asset management rather than complicate it.
Although GASB 34 has been in use for over 25 years, governments still face inherited records, aging systems, staffing shortages, and ongoing audits. Effective capital asset management requires sound policies, consistent processes, practical expectations, and thorough documentation. Even governments with limited resources can ensure accurate, reliable records through clear communication and ongoing improvement.