GASB amends implementation guidance for capital assets

The Governmental Accounting Standards Board (GASB) has issued Implementation Guide No. 2021-1, Implementation Guidance Update—2021.

The implementation guide contains new questions and answers that address the application of GASB standards on derivative instruments, fiduciary activities, leases, and nonexchange transactions. The guide also amends certain questions and answers issued in previous implementation guides.

This article focuses on the amendments to the capitalization policy question and answer that was previously issued in Implementation Guide 2015-1.

Capitalization policy guidance

Question 7.9.8, as follows, was originally included in Implementation Guide 2015-1 to address the capitalization requirements for capital assets that are significant in the aggregate:

Should a government’s capitalization policy be applied only to individual assets or can it be applied to a group of assets acquired together? Consider a government that has established a capitalization threshold of $5,000 for equipment. If the government purchases 100 computers costing $1,500 each, should the computers be capitalized?

Original guidance

In response to the above question, Implementation guide 2015-1 stated that it may be appropriate for a government to establish a capitalization policy that would require capitalization of certain types of assets with individual acquisition costs that are less than the threshold for an individual asset. This answer also noted that computers, classroom furniture, and library books are common assets that may not meet the capitalization policy on an individual basis but might be considered material collectively.

Amended guidance

While the question itself remains unchanged — now Question 5.1 in Implementation Guide 2021-1 — the answer has been amended to state that a government should capitalize assets whose individual acquisition costs are less than the threshold for an individual asset if those assets in the aggregate are significant.