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Over the past two months and through year-end, a high priority project is taking shape – Capital Assets. There are several opportunities for higher education to hit the ground running on this issue and to continue efforts over the long-term—the project and its opportunities are explored here.

The Capital Assets project and timeline will operate similarly to other Governmental Accounting Standards Board (GASB) projects. GASB continually strives to improve accounting and reporting guidance for governmental entities, such as public colleges and universities. GASB must follow guidelines during this process, which must be comprehensive, independent, and encourage broad participation. The progression must objectively consider all stakeholder views and is subject to oversight by the Financial Accounting Foundation. The process before proposals are released for comment can be lengthy and should be full of discourse and debate. The timeline begins with adding a topic to GASB’s technical agenda, as a research item. The issuance of documents for public comment can provide opportunity for financial statement preparers to inform and shape guidance along the way.

Because time constraints can impede controllers paying attention to projects until documents for public comment are close to being issued, NACUBO supports member institutions by monitoring activities, such as the Capital Assets project. NACUBO provides input to the GASB through its representation on the Governmental Accounting Standards Advisory Council (GASAC), meetings involving its Accounting Principles Council (APC), and direct outreach to GASB staff.

The Capital Assets history and NACUBO’s input and involvement with the project are outlined below.

Background: Capital Asset Research

In 2019, GASB approved Capital Assets as a pre-agenda research topic. The foundational definition of capital assets resides in Statement No. 34, Basic Financial Statements – and Management’s Discussion and Analysis – for Statement and Local Governments. The definition in GASB’s landmark statement encompasses intangible assets when the assets are used in operations. There is also a broad equivalency between nonfinancial assets and capital assets; however, capital assets must be reported at historical cost and be depreciated over their estimated useful life. The primary exceptions to depreciation are land, as it is considered inexhaustible, and infrastructure that can be valued using a modified approach that considers maintenance, replacement, and preservation.

According to GASB staff, capital assets have a primary focus or are significantly addressed in multiple subsequent pronouncements including—

  • Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries
  • Statement No. 44, Economic condition Reporting: The Statistical Section
  • Statement No. 51, Accounting and Financial Reporting for Intangible Assets
  • Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements
  • Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements
  • Statement No. 72, Fair Value Measurement and Application
  • Statement No, 87, Leases
  • Statement No. 91, Conduit Debt Obligations
  • Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements
  • Statement No. 96, Subscription-Based Information Technology Arrangements

GASAC Feedback

After the approval of pre-agenda research activities, GASAC offers input. In August, the technical research agenda item given the highest priority by GASAC members was capital assets. The topic was seen as a high priority because of the lack of clarity throughout GASB literature, the fact that not all nonfinancial assets are capital in nature, and the current policy limelight of infrastructure. Members indicated that since the issuance of Statement 34, guidance in multiple standards have impacted capital assets and have reinforced the notion of intangible assets as capital assets.

Roundtables With GASB’s Constituents

After the August GASAC meeting, GASB staff began reaching out to representatives from among its many stakeholders to continue its research through roundtable discussions. For research roundtables, GASB staff provided background reading and a series of questions to be covered. Two members of NACUBO’s APCBob Kuehler, associate vice president and university controller, University of Colorado and APC Chair and Tom Ewing, associate controller and financial reporting director, The Ohio State Universitywere asked to participate in late September and mid-October roundtables.   

The following topics are expected to be covered during the September and October discussions:

  • Capital asset definition
  • Initial recognition
  • Impairment
  • Depreciation
  • Modified approach for reporting infrastructure assets
  • Note disclosures, required supplementary information, and the statistical section
  • Other topics

Questions posed by GASB staff are designed to address whether provisions in current guidance—

  • Result in valuable information for analyses, decision-making, or assessing accountability
  • Are problematic to apply in practice
  • Can or cannot be applied to various situations
  • Help with meeting the objectives of the guidance in the standards

Examples of roundtable questions include—

  • What do you think are the positive and negative aspects of the provisions for reporting depreciation of capital assets?
  • What do you think are the positive and negative aspects of the modified approach to reporting infrastructure assets?
  • What do you think are the positive and negative aspects of the provisions for initial recognition of capital assets?
  • What do you think are the positive and negative aspects of the definition of capital assets?

NACUBO Actions

During its November liaison meeting with GASB staff, NACUBO and its APC will review select items from among its list of topics below. Since research roundtables are not open to the public, NACUBO will provide a summary of this discussion after the November meeting (see NACUBO’s APC webpages) and will continue to monitor the project. 

Higher Education Topics of Interest Related to Capital Assets include

  • Add Statement No. 52, Land and Other Real Estate Held as Investments by Endowments, to the list of subsequent guidance that is influenced by the definition of capital assets
    • Allow land to be considered and classified as an investment by the governing board of a public institution, when held as a fund functioning as an endowment
    • Seek principles-based guidance acknowledging that land, by definition, does not have to be a capital asset
  • Align guidance for artworks and historic treasures with that used by museums and private not-for-profit colleges and universities
  • Review capital commitment disclosures
  • Evaluate costs and burden related to accurate infrastructure measurement
  • Clarify the distinction between intangible assets and capital assets
  • Ensure consistency between definitions concerning operating activities
    • Certain intangible assets used in operations are defined as capital assets
    • Some activities considered operating by the reporting government may not be clearly supported in GASB standards
  • Review guidance on Impairment assessment
  • Clarify guidance for donations of capital assets for valuation and subsequent investment
This analysis was produced by Sue Menditto for the Fall 2021 edition of Accounting & Tax Quarterly. 


Sue Menditto

Senior Director, Accounting Policy


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