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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

Assets Held in Trust

Capital assets in the custody of an agency that are owned by non-state entities (for example, art collections owned by families, estates or other organizations) or assets owned by the federal government and loaned to the agency must be evaluated to determine the appropriate accounting and reporting treatment.

These assets are tracked in the State Property Accounting (SPA) system in accordance with their policy for control and safeguarding purposes. However, per GASB 84, financial reporting is based on whether the agency has control of the asset and a fiduciary responsibility to external parties, as well as applicable capital asset guidance under GASB 34. Assets that do not meet recognition criteria under these GASB standards are not reported in the financial statements but must still be tracked in SPA for accountability purposes.

Assets held for others that meet fiduciary criteria are reported in fiduciary funds (FT22). Assets that are used in agency operations and provide service capacity may be reported as capital assets (regardless of legal ownership) if the agency exercises control over their use.

The following table summarizes the accounting treatment for common scenarios involving assets in the custody of an agency.

Scenario Description Report Depreciate Applicable GASB Standard
Assets loaned to the state Capital assets held by the state on behalf of a non-state entity and not used in agency operations. For example:
  • Art collections owned by families, estates and others.
  • Assets owned by the federal government loaned to the state for display.
Assets held in trust and not used in operations are reported by debiting GL account 0435 and crediting GL account 1400.		 Yes - these assets are reported in the financial statements. Assets held for others are reported in custodial funds (FT22), except for universities (report in FT05); otherwise track in SPA only. No GASB 84 and Comptroller Policy
Assets not owned by the state but controlled by the agency and used in agency operations. Capitalize if the agency controls the asset and it provides service capacity. Yes GASB 34
Assets donated – state’s intent is to keep the asset A voluntary nonexchange transaction entered into willingly by two or more parties. A voluntary contribution of resources between state agencies is not a donation. Capitalize at acquisition value; reporting depends on the fund type. Yes GASB 33
Assets donated – state’s intent is to sell the asset Assets received but intended for sale rather than use. A voluntary nonexchange transaction entered into willingly by two or more parties. A voluntary contribution of resources between state agencies is not a donation. Recognize the asset at acquisition value. Report as asset held for sale or inventory-type asset. No GASB 33, GASB 34 and GASB 104
Capital assets purchased with federal grants/awards – federal government retains a residual interest in the asset
  • Equipment purchased by the agency with federal funds where the federal government retains a residual interest in the equipment.
  • The agency uses the equipment in its operations (activities) and makes the decisions on when and how the asset will be used and managed.
 		 Yes – the historical cost of these assets is reported in the agency statement of net position as a capital asset. The agency reports a cash inflow and federal revenue and a cash outflow with the asset. Also, include depreciation expenses for these assets in the expenses for the function that uses the assets. Yes GASB 34
Capital assets purchased with federal grants/awards – federal government retains or is silent on the ownership/title to the asset
  • Equipment purchased with federal funds by the agency where the federal government retains ownership of the equipment per the grant/award.
  • The agency uses the asset in its operations and makes the decisions on when and how the asset is used and managed.
  • According to the grant/award, equipment must be returned to the federal government at the completion of the grant/research.
  • As a matter of practice, even if the contract doesn’t state explicitly that the asset belongs to the agency, the asset is usually retained by the agency. Thus, it is capitalized and depreciated.
 		 Yes – the historical cost of these assets is reported in the agency statement of net position and depreciation expense for these assets is included in the expenses for the function that uses the assets. Yes GASB 34