Governmental Accounting--Ch. 9 General Capital Assets, General Long-Term Liabilities, and Permanent Funds
Terms
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- Capital Assets
- include Land, Improvements to Land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art and historical treasures, infrastructure and all other tangible and intangible assets that are (1) are used in operations and (2) have useful lives extending beyond a single reporting period. They are not physically consumed by their use, though their economic usefulness typically declines over their lifetimes.
- General Long-term Liabilities
- defined in the GASB as long-term debt except that of proprietary funds or Trust Funds. They thus include the unmatured principal of bonds, warrants, notes, capital leases, certificates of participation, underfunded pension plan contributions, claims and judgments, compensated absences, landfill closure and post-closure care, and other forms of general government debt that are not a primary obligation of any fund.
- In-Substance Defeasance
- governments may set aside resources in an irrevocable trust to provide for future debt service requirements for a particular debt issue. Means "terminated" or "rendered null and void." Debt that has been this is considered to be extinguished, is removed from the GLTL accounts, and is not reported in the SLG's balance sheet.
- General Capital Assets
- do not represent financial resources available for expenditure, but are items for which financial resources have been used and for which accountability should be maintained.
- Gifts
- capital assets acquired by this are recorded at their fair value when received, which is the value of the consideration received under the cost principle discussed earlier.
- Cost of Land
- includes the amount paid for the land, cost incidental to acquisition of the land, and expenditures incurred in preparing the land for use (e.g. for storm water drainage and for water and sewer connection charges)
- Fund Capital Assets
- capital assets of proprietary funds should be reported in both the government-wide and fund financial statements. Fiduciary funds should be reported only in the statement of fiduciary net assets.
- Buildings or Buildings and Improvements
- this classification includes (a) relatively permanent structures used to house persons or property and (b) fixtures that are permanently attached to and made a part of buildings and that cannot be removed without cutting into walls, ceilings, or floors or without in some way damaging the building.
- Construction in Progress
- includes the cost of construction work undertaken at a balance sheet date. These costs are appropriately reclassified upon project completion.
- General Capital Assets
- the GASB defines these as all capital assets other than those accounted for in proprietary funds or trust funds (in some Trust Funds and Internal Service Funds and Enterprise Funds, these are accounted for in the same manner as in profit-seeking enterprises.
- Modified Approach Infrastructure Assets
- are part of a network, or subsystem of a network that are not required to be depreciated if two requirements are met: 1.) the government manages the eligible infrastructure assets by using an asset management system that has certain characteristics 2.) the government documents that the eligible infrastructure assets are being preserved approximately at or above a condition level established and disclosed by the government.
- Eminent Domain
- is the power of the government to seize private property for public use, compensation to the owner normally being determined through the courts. Property thus acquired is accounted for in the same manner as that acquired in a negotiated purchase.
- Escheat
- occurs when title to the property is vested in or reverts to the government because the rightful owner does not come forward to claim it, or dies without known heirs.
- Costs
- (as defined when trying to determine what costs should be assigned to capital assets)
- Infrastructure Assets
- are long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of these include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lightening systems.
- Machinery and Equipment
- examples are trucks, automobiles, pumps, desks, typewriters, computers, and bookcases. If this is movable, it must be accounted for with particular care.
- Permanent Funds
- GASB Statement No. 34 requires governments with general government activities to use these funds "to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs, may be used for purposes that support the reporting government's programs, that is, for the benefit of the government or its citizenry."