GASB 34: Capital Assets, Valuation, and Depreciation

Under GASB 34, general capital assets are the long-lived tangible resources a state or local government uses to deliver services, and they must be reported on the government-wide Statement of Net Position at historical cost less accumulated depreciation, with donated items entered at fair value at the date of receipt. They do not appear as assets in the fund financial statements, where their purchase is recorded as a capital outlay expenditure instead.¹

What Counts as a General Capital Asset

General capital assets are the tangible resources used for a government’s primary activities. Each government sets its own capitalization threshold, the minimum dollar amount an item must cost before it is tracked as an asset rather than expensed.²

For reporting, these assets are typically organized into major classes:³

Land and land improvements
Buildings and building renovations
Machinery and equipment
Infrastructure, such as roads and bridges
Library books
Construction in progress

Costs incurred after acquisition are split by whether they add value. Major renovations that extend an asset’s life or increase its capacity are added to the asset’s recorded value. Normal repairs and maintenance that do not materially add value are expensed in the year they occur.⁴

How to Value the Assets

Capital assets are recorded at historical cost. That cost includes the original purchase price plus any charges needed to get the asset ready for use, such as transportation, professional fees, and site preparation.⁵

When original records for older assets are not available, GASB 34 permits an estimated historical cost, provided it is calculated through a systematic process such as applying price indexes to work back to the acquisition-date cost.⁴

Donated assets are handled separately. They are recorded at their fair value at the time received, meaning the price the government would have paid for an asset with the same service potential in an open market.⁵

Depreciation and the Modified Approach

Capital assets generally must be depreciated in the government-wide statements, spreading each asset’s cost over its estimated useful life so that current revenues can be measured against the full cost of services.⁶

Some assets are not depreciated:⁶

Land and specific land preparation costs
Library books
Construction in progress
Infrastructure assets reported using the modified approach

The modified approach is an alternative available only for eligible infrastructure networks or subsystems, such as a road network or a bridge system. Instead of recording annual depreciation, the government expenses maintenance costs as incurred. To qualify, the government must maintain an asset management system with an up-to-date inventory and perform condition assessments at least every three years.⁷ It must also document that the assets are being preserved at or above a condition level it has publicly disclosed.⁶

Where Capital Assets Appear in the Financial Statements

In the government-wide statements, capital assets are listed on the Statement of Net Position at historical cost minus accumulated depreciation.⁸ In the fund financial statements, the same assets are not on the balance sheet at all; because those statements focus on current financial resources, the purchase is reported as a capital outlay expenditure when the money is spent.¹

The notes to the financial statements must carry detailed disclosures for each major class of capital asset:⁹

Beginning and ending balances
Acquisitions during the year, along with any sales or disposals
Accumulated depreciation totals for each class

Governments using the modified approach add supplementary information, including schedules of their most recent condition assessments and a comparison of estimated versus actual maintenance and preservation spending.¹⁰

Finally, the report must include a reconciliation between the fund statements and the government-wide statements. That reconciliation explains items like why the cost of a building is an expenditure in one presentation and a long-term asset in the other.¹¹

1
National Center for Education Statistics. NCES Chapter 5: Reporting of Expenditures
2
National Center for Education Statistics. NCES Chapter 5: Capitalization Thresholds and Estimated Useful Lives
3
Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.E: Recording General Capital Assets
4
Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.F: Valuation of Capital Assets
5
Indiana State Board of Accounts. Indiana SBOA FAQ – Value of Donated Capital Assets
6
Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.J: Depreciation and Modified Approach
7
Federal Reserve Bank of Chicago. Chicago Fed Letter No. 184c – Infrastructure Asset Management
8
Office of the New York State Comptroller. NY OSC Chapter XIV – Section 14.C: Necessity for General Capital Assets Reporting
9
National Center for Education Statistics. NCES Chapter 5: Required Disclosures about Capital Assets
10
Office of the New York State Comptroller. NY OSC Chapter II – Section 4.C: Cash and Basic Financial Statements
11
California Department of Education. GASB 34 New Financial Reporting Requirements