Accounts and Reports

GAAP POLICY AND PROCEDURE MANUAL

• Capital assets should be reported at historical cost, which includes ancillary charges.
• Donated capital assets should be reported at their estimated fair value at the time of acquisition, plus ancillary charges.
• Capital assets include land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, and works of art and historical treasures. Works of art and historical treasures are not reported by the State due to its policy on these items.
• Capital assets (other than land) should be depreciated over their estimated useful lives unless they are inexhaustible.

• Although STARS has capital asset account numbers set up as assets, they are not used. The following account numbers are set up:
  • 1040 - Land
  • 1041 - Buildings and leasehold improvements
  • 1042 - Accum. Depreciation - Buildings and improvements
  • 1043 - Furnishings and equipment
  • 1044 - Accum. Depreciation - improv. other than buildings
  • 1045 - Vehicles (not needed separately)
  • 1046 - Accum. Depreciation - equipment and vehicles
  • 1047 - Construction
• As capital assets are purchased, they are expensed to the 4000 series expenditure subobject codes.
• As capital assets are sold, the proceeds are recorded as revenue in the 6101 series of revenue subobject codes.
• Detailed inventory records are maintained by the individual agencies. A monthly report (DAFR8460) is mailed to each agency reflecting all payments and adjustments to those 4000 series subobject codes that are required to be reported on their annual inventory. The agency's summarized inventory totals by subobject (Form DA-80A) and fund (DA-80B) were reported annually to the Division of Accounts and Reports by the agencies. These forms have been replaced by form DA-87.
• A depreciation schedule is also maintained by David M. Griffith for the cost allocation plan. This depreciation schedule uses a capitalization limit of >$5,000. It also has different estimated useful lives than used for the GASB 34 depreciation calculation.

• Establish capitalization policy regarding type of capital assets.
• Establish estimated lives.
• Determine estimated salvage value of capital assets.
• Determine method used to inventory, track and depreciate capital assets.
• Determine if depreciation will be calculated for classes of assets, individual assets, or a composite method as allowed in GASB 34 para. 161-166.
• Address works of art and historical treasures.
• Determine if depreciation expense will be allocated by function, or reported as one general function.

• Accounting policy for capital assets.
• Major classes of capital assets, including collections (governmental activities vs. business type activities). Disclosure should include:
  1. Beginning and end of year balances.
  2. Capital acquisitions.
  3. Sales or other dispositions.
  4. Current year depreciation expense, with disclosure of the amounts charged to each of the functions in the statement of activities.
• Capital assets that are not being depreciated should be disclosed separately from those that are being depreciated.
• Collections not capitalized - description and reasons these assets are not capitalized.

• Division of Accounts and Reports Policy & Procedure Manual filing no. 13,001 requires that each state agency submit a summary of the physical inventory of all fixed and moveable property of the State as of June 30 of each year. The policy requires that property with a unit cost of $5,000 or more and expected serviceable life of longer than one year be included on the inventory. The summary listing will provide the agency, asset classification (land, building, equipment), and cost of the assets by class.
• It was determined that the amount of works of art and historical treasures were not material to the financial statements. Therefore, they will not be included in the financial statements.
• An annual survey will be conducted to determine additions and deletions.

• Depreciation will be computed using the straight-line method with no salvage value. Accumulated depreciation will be calculated in total by class of assets by year using the one-half year convention in year of purchase.
• Depreciable lives established as follows:
  • 40 years - buildings and leasehold improvements 
  • 8 years - furnishings and equipment
  • 5 years - automobiles
• The identification of capital assets not fully depreciated at the beginning of GASB 34 implementation year will be accomplished by requesting each agency to provide data to the Division of Accounts and Reports. The data should be aggregated by class of assets and year of purchase.
• Financial statement capitalization thresholds for assets acquired prior to the implementation year are as follows:
  • $100,000 - Buildings, building improvements, land and land improvments.
  • $5,000 - Other equipment and furnishings. 
• Capital gain/loss greater than $500,000 per asset will be considered material and reported separately. Less than $500,000 will be recorded as other revenue.
• The State has adopted a policy for all works of art and historical treasures: they will be held for the purposes of exhibition to the public to further education and research. It is also our intent to preserve and protect such items to insure there availability to future generations. If any items are sold from any collection, the proceeds from such disposition are intended to be set aside for future acquisitions for the collections.