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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

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Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Capital Assets

Amortization

For capital assets, the straight-line amortization method is used for Land Use Rights – Term, Computer Software and Other Intangible Capital Assets.

For right to use assets (including both leases and subscription-based information technology arrangements), amortization is calculated based on the following multiple factors:

  • Amortize over the lease term or the useful life of the underlying asset, whichever is shorter.

    Note: Even if the underlying asset is traditionally a non-depreciable asset (such as land), the lease liability is amortizable.

  • Split the lease liability between current portion and long-term portion.
  • Use any systematic and rational method to amortize. The agency must document the decision-making process. Examples include:
    • Straight-line amortization method
    • Effective interest method

See Leases — Recognitions and Measurements for Lessees for more information.

Amortization of lease receivables for lessors uses the effective interest method, not straight line. See Recognitions and Measurements for Lessors for more information.