In September, GASB authorized the issuance of Statement 104, Disclosure of Certain Capital Assets, which requires capital assets held for sale, intangible assets, lease assets, and subscription assets to be broken out separately in note disclosure.
Effective Date Statement 104: Fiscal Years beginning after June 15, 2025
Background
Capital assets are defined in Statement 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as being “used in operations and having a useful life of greater than one year.” The issuance of Statement 87, Leases; Statement 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements; and Statement 96, Subscription-Based Information Technology Arrangements, created a new asset category: right-to-use (RTU) intangible assets. GASB research indicated financial statement users would evaluate information about intangible and tangible capital assets differently. For example, tangible capital assets have life expectancies, conditions, and service capacities different from intangible capital assets. GASB concluded that intangible capital assets should continue to be classified as capital assets but disclosed separately by major class.
Statement 104 does not change any current recognition or measurement requirements.
Presentation
For the capital assets notes disclosure required by Statement 34, the following items should be broken out separately:
- Lease assets (Statement 87) by major class of underlying assets
- Intangible RTU recognized by an operator (Statement 94) by major class of underlying public-private and public-public partnership asset
- Subscription assets (Statement 96)
- Other intangible assets by major class of asset
Intangible assets that represent the right to use intangible underlying assets are not required to be disclosed separately but should not be reported with owned intangible assets.
Capital Assets Held for Sale
GASB research indicated that financial statement users would evaluate a capital asset differently if that asset were held for sale, e.g., in liquidity evaluations, estimating future cash flows, and evaluating operating effectiveness.
This new held-for-sale disclosure requirement will apply to both tangible and intangible capital assets.
A capital asset is a capital asset held for sale if both:
- The government has decided to pursue the sale of the asset.
- It is probable that the sale will be finalized within one year of the financial statement date.
The Statement does not require an asset to be idle to be considered a capital asset held for sale.
Statement 104 includes the following nonexhaustive list of factors to consider when evaluating whether it is probable that the sale will be finalized within one year of the financial statement date:
- Whether the asset is available for immediate sale in its present condition
- Whether an active program to locate a buyer has been initiated, which may include the asset being put out for bid
- Market conditions for selling that type of asset
- Regulatory approvals needed to sell the asset
A government should evaluate whether a capital asset is a capital asset held for sale each reporting period.
A capital asset held for sale should continue to be reported within the appropriate major class of capital asset.
A government should disclose capital assets held for sale in notes to financial statements, with separate disclosure of historical cost and accumulated depreciation (or amortization), by major class of asset, as well as the carrying amount of debt for which capital assets held for sale are pledged as collateral, for each major class of asset.
The disclosure of capital assets held for sale should be made for both governmental business-type activities.
Transition & Effective
Statement 104 is effective for fiscal years beginning after June 15, 2025 and should be applied retroactively to all periods presented in the basic financial statement. A government should disclose that it implemented this Statement and any financial statement line items (excluding totals and subtotals) affected by its application. If restatement is not practicable, the reason for not applying changes retrospectively should be disclosed. Early adoption is encouraged.
Conclusion
If you would like assistance complying with the new guidance, please reach out to one of our professionals at Forvis Mazars. Our public sector accounting, audit, and consulting experience and resources can help you stay compliant, stretch your dollar, and plan for the future. We serve a variety of entities, including state and local governments, airports, transportation authorities, public power and utility providers, tribal governments, and public colleges and universities.