​Capital Asset Acquisitions

Introduction

For financial reporting purposes, capital assets (fixed assets) include infrastructure, works of art and historical treasures (AHT), permanent easements, intangibles (copyrights, patents, software, etc.), as well as any previously recorded fixed assets, that have a useful life extending beyond a single reporting period (GASB 34).  However, intangible assets are recorded in the agency’s closing package rather than in FAS.

Acquisitions Overview

An ‘acquisition’ is the addition of a capital asset to an agency’s assets. Most acquisitions are new purchases, but can also be acquired by donation, by entering into a lease agreement, by self-constructing an item (construction in progress), by receiving a seized item, by receiving a trade-in, or by receiving a transfer from another fund or agency.

 

These various transactions are either monetary or non-monetary transactions. Acquisition transactions accomplish the following accounting objectives:

 

1.  To capitalize ancillary costs when applicable.

2.   To record the following in the STARS General Ledger:

  • The historical cost or fair market value at the time of acquisition, for all assets over the statewide capitalization amount determined by FPAC
  • Statewide accumulated depreciation and depreciation expense.

3. To record the following in FAS:

The historical cost or fair market value (for donated or seized assets) at the time of acquisition, for all assets over the statewide mandatory inventorial amount determined by the Department of Administration.

  • The non-financial, descriptive data regarding a new asset to facilitate inventory tracking, risk management insurance data, and statewide reporting.
  • The statewide accumulated depreciation and agency accumulated depreciation.

Asset Identification (Property Tags and Numbers)

Upon receipt and acceptance, all inventorial capital assets of the State will be tagged, when practical, with pre-numbered State of Idaho Property Tags (from the Department of Administration) affixed in a readily identifiable location. Land and other assets that cannot be reasonably tagged are excluded; however, they are assigned a property number for tracking in the system.

Monetary Acquisition

To qualify as a monetary acquisition, the majority of the expenditure to acquire the asset occurs in the current fiscal year. An example is a purchase, where cash is used as the medium of exchange for a unit of value. Ancillary cost may also be associated with the acquisition and may be capitalized as an increase to the asset's value.  GASB Statement 34 requires that assets acquired by donation be recorded as revenue in the year of donation. For financial statement purposes, donations are also considered to be monetary acquisitions. But FAS Transaction Codes for donations are described as ‘non-monetary’.

Non-Monetary Acquisition

Non-monetary acquisitions are assets acquired without current fiscal year expenditure. Except for ancillary costs, no cash is expended to acquire the asset. A non-monetary item is usually stated in “older” dollars, and therefore requires direct entry in to FAS. FAS Transaction Codes for donations are described as ‘non-monetary’, though for financial statement purposes, donations are recorded as revenue in the year of donation.

Current Year Acquisition

In both Governmental and Proprietary fund types, an acquisition by purchase is the simplest transaction. The transaction for the acquisition of an asset in STARS can automatically post to the FAS Hold File (S032). The STARS transaction will post in the following General Ledger (GL) accounts:

 

Purchase of capital asset:

Debit – GL

Credit – GL

Expenditures

4200

 

            Cash

 

1003

 

Current year acquisitions can be entered directly in the FAS Data Entry screen 35 (S035), or are entered in FAS Data Entry screen 33 (S033) if the purchase transaction was entered in STARS.

 

Statewide capitalized assets should have a Capitalization Indicator (CI) of ‘S’. All assets with a CI of ‘S’ are considered reportable in the State’s Annual Comprehensive Financial Report (ACFR). The programming in FAS will help determine which assets are statewide capitalized.

  • Statewide capitalized assets are reported in the general ledgers based on asset class.
  • Statewide capitalized assets acquired in the current year will process in the following STARS GLs:

Asset

Debit – GL

Credit – GL

Land

1701

 

Buildings and Building Improvements

1710

 

Improvements Other than Buildings

1730

 

Machinery, Equipment, and Other

1750

 

Equity:

 

 

    GAAP Expense

 

4600

 

Assets not meeting the statewide capitalized asset test are reported in FAS as agency inventory.

Prior Year Acquisition

To qualify as a prior year acquisition, any expenditure associated with the asset acquisition must be recognized and closed to equity during the State’s fiscal year-end process. For financial statement purposes, the acquisition of an asset from a previous period is recorded as a prior year adjustment. Two common reasons for prior year adjustments are to correct an error or to add an asset never recorded. Prior year adjustments must be entered using FAS Data Entry Screen 35 (S035). All prior year adjustment transactions, regardless of asset value, require SCO release. Prior year adjustment transactions post to equity in the general ledger.

 

Depending on asset class, the acquisition of statewide reportable prior year assets (with a Capitalization Indicator of ‘S’) will process in the following STARS general ledger (GL) accounts:

 

Asset:

Debit – GL

Credit – GL

Land

1701

 

Buildings and Building Improvements

1710

 

Improvements Other than Buildings

1730

 

Machinery, Equipment, and Other

1740

 

Equity:

 

 

Invested in Capital Assets

 

3002

Acquisition Methods

An acquisition method indicator records how the asset was acquired. The following table describes the indicators for the acquisition method data element:

  • N - New Purchase. Property acquired by purchase in a fiscal period. The most common acquisition method.
  • D - New Donation. Property received from an individual or non-state entity. New property. Usually, not previously owned or used.
  • E - Escheat. Property reverted to the state. Occurs rarely.

  • F - Federal Excess. Personal property of the Federal Government on loan to the State. The State does not have ownership. Property is usually recorded in FAS for inventory and insurance purposes only.

  • G - Used Donation. Property received from an individual or non-state entity. Usually, previously owned or used (second-hand).

  • I - Interagency Transfer in. Property transferred from one State of Idaho agency to another State of Idaho agency.

  • L - Capitalized Lease. Property under contract where substantially all benefits and risks inherent in ownership of the property transfer to the State.

  • O - Operating Lease. Property under contract, but not owned by the State. Property is usually recorded in FAS for inventory and insurance purposes only.

  • P - Federal Surplus. Personal property no longer needed by the federal government. Property may be donated to the State or acquired for a fee. The State will ultimately have ownership.

  • S - Seizure. Property confiscated by legal authority.

  • T - Traded In. Property acquired by giving in part or in-whole property or goods as payment. Occurs rarely.

  • U - Used Purchase. Previously used or owned (second-hand) property acquired by the stat.

  • X - Other. Property not described by other acquisition indicators. Occurs rarely.

Governmental fund assets are shown in the government-wide statements, but are excluded in the governmental fund statements. Capital assets acquired by Governmental Funds are tracked separately from Proprietary Funds. To do this, the State will use Fund 0700 for Governmental Funds and the actual fund for Proprietary Funds.

Materiality Thresholds

Assets can be classified as 'statewide capitalized' or as 'agency inventory.'  An asset must meet a materiality threshold and be owned by the State to be classified as statewide capitalized. The State has established materiality thresholds to determine whether an asset is capitalized, inventoried, or expensed. Only capitalized assets are reported in the State’s financial statements. By policy, inventory assets with a value of $2,000 or more are required to be recorded in an asset management system, but are not reported in the State’s financial reports.


 

Statewide Capitalized Assets and Intangible Assets

The State Controller’s Office (SCO) reports capital assets in the States Annual Comprehensive Financial Report (ACFR). The Fiscal Policy Advisory Committee (FPAC) established policies to account for statewide capitalized assets. Currently, assets valued at $5,000 or more and intangible assets valued at $200,000 or more meet the materiality threshold for statewide reportable assets in the ACFR.

Inventory Assets

In FAS, an asset valued less than $5,000 is considered agency inventory. Idaho Code 67-5746 requires each agency to maintain an inventory of capital assets in accordance with requirements set by the Department of Administration. Those requirements include listing assets whose life exceeds two years and whose costs exceed a designated amount.

 

Per Idaho Code 67-5746, each agency director is responsible for conducting an annual inventory of all personal property. Personal property includes furniture, equipment, etc., with a cost of $2,000 or more per item, high pilferage items, and other sensitive items.

 

At the option of each agency’s management, capital assets may be defined and recorded at values less than $2,000.

Ownership

Ownership is the second test used to determine if an asset is statewide reportable. Keep in mind that owning the asset is not a requirement when recording acquisitions or dispositions of capital assets. Refer to the FPAC policies from the SCO website. The following are one-character Ownership Codes:

  • A  - State Agency Owned. Assets valued $5,000 or more are statewide reportable. FAS will generate transactions to STARS.
  • C - Combined Ownership. Assets valued $5,000 or more are statewide reportable. FAS will generate transactions to STARS.
  • F - Federally Owned. Assets valued $5,000 or more are statewide reportable. FAS will generate transactions to STARS.
  • E - Endowment Property. Assets valued $5,000 or more are statewide reportable. FAS will generate transactions to STARS.
  • G - State Ownership – Possible Federal Claim. Assets valued $5,000 or more are statewide reportable. FAS will generate transactions to STARS.
  • N - Non-State Agency Owned. FAS will not generate transactions to STARS.
  • L - Leased Property. FAS will not generate transactions to STARS.
  • O - Other State Agency Owned. Assets valued $5,000 or more are statewide reportable. FAS will generate transactions to STARS.
  • X - Federal Title – Non Reportable. FAS will not generate transactions to STARS.

Capitalization Indicator

The Ownership Code helps to determine the capitalization indicator (CI). The CI is required to post an acquisition. It controls whether or not transactions that are processed in FAS are sent to STARS general ledgers. The one-character CI codes are:

 

​Indicator​Description​FAS Sends Transaction to STARS

S

Statewide Reportable

Yes

A

Agency Depreciation Reportable

No

I

Inventory

No

 

The CI is a financial-controlled element and cannot be updated on the Property File. The CI can only be changed using transaction codes.

Depreciation

FAS processes monthly depreciation for active statewide capital assets and inventorial assets posted to the Property File. Assets in the Hold File will not be included in the depreciation process.

 

The deprecation process includes calculating depreciation based on cost, capitalization threshold, depreciation method, salvage value, useful life, and in-service date.

 

The capitalization threshold for depreciation is:

 

Cost

$5000

Statewide Capitalized

 

$5000

Optional Agency Capitalized Threshold

Statewide Depreciation

The State depreciates all depreciable capitalized assets. Depreciation expense is recorded as a direct expense of the Fund and Budget Unit (function). Except for collections (e.g., libraries), depreciation is calculated and recorded for all depreciable capitalized assets using the straight-line method: Depreciation = (Cost – Salvage Value) / Useful Life.

Agency Depreciation

FAS processes depreciation on active assets only. Agencies have the option to depreciate their assets using a different materiality threshold and a different depreciation method.  For instance, a capitalization threshold for depreciation can be set at a value less than $5,000. The depreciation calculations for assets meeting the threshold will post to the agency accumulated depreciation financial field on the Property File. Agency accumulated depreciation is only reported in FAS and is never sent to STARS.

 

FAS can calculate deprecation using three methods.  Agencies have the option of selecting a deprecation method other than the straight-line method. For example, some agencies want to accelerate their deprecation. Thus, the two alternative accelerated methods available for agencies are the double declining and sum-of-the-years-digits methods.