The GASB has issued an Exposure Draft entitled Disclosure and Classification of Certain Capital Assets. This Exposure Draft requires certain information regarding capital assets to be presented by major class of capital asset and also establishes criteria for governments to use in determining whether a capital asset should be classified as held for sale.

GASB Statement No. 34 paragraphs 116 and 117 require governments to disclose a roll forward of capital assets by major class, which displays the beginning balance, additions, disposals and ending balance of capital assets and accumulated depreciation for each major class. Over the past couple of years, the adoption of GASB Statement No. 87, Leases, and GASB Statement No. 96, Subscription-Based Information Technology Arrangements, has resulted in the presentation of lease right-to-use assets and subscription assets within the financial statements and must also be presented as part of this disclosure. This has led some practitioners to question how these diverse types of assets should be aggregated within the capital asset roll forward disclosure.

The Exposure Draft provides clarity around the presentation format to be utilized for this disclosure. The Exposure Draft requires capital assets held for sale, intangible assets and lease right-to-use assets arising from GASB Statement No. 87 to be disclosed separately by major class. In the case of lease right-to-use assets, the disclosure would be by major class of underlying asset for the lease. Additionally, subscription-based assets arising from GASB Statement No. 96 should be separately disclosed.

The Exposure Draft also establishes criteria for governments to use in determining whether a capital asset should be classified as held for sale. To be held for sale (1) the government must have decided to sell the capital asset, and (2) it must be probable that the sale will be finalized within one year of the financial statement date.

The provisions within the Exposure Draft would be effective for fiscal years beginning after June 15, 2025. Earlier application would be encouraged.

The full text of Exposure Draft can be found here.

Published: 11/01/2023

_{^{Readers should not act upon information presented without individual professional consultation.}}

_{^{Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.}}