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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Capital Assets

Capital Asset Categories
Buildings & Building Improvements

A building is defined as a structure that:

  • Is permanently attached to the land
  • Has a roof
  • Is partially or completely enclosed by walls
  • Is not intended to be transportable or moveable

Buildings that are an ancillary part of the state’s highway network (such as rest area facilities and toll buildings) are reported as infrastructure — rather than as buildings.

Building improvements are capital events that materially extend the useful life of a building and/or increase the value of a building. Building improvements are capitalized and recorded as an addition of value to the existing building if the expenditure meets the capitalization threshold.

GAAP determines if demolition costs are capitalized or expensed depending on the following situations:

  • If land and building are purchased with the initial intent to use the land and demolish the building, capitalize the cost to demolish the building as land improvement.
  • If land and building are purchased with the initial intent to use the land, demolish the building and build a new building, capitalize the cost to demolish the building as part of the cost of the new building if the demolition occurs soon thereafter.
  • If land and building are purchased with the initial intent to use the land and the building, expense the costs to demolish the existing building at a later date. The demolition costs are an expense associated with the cost of using the existing asset and are not capitalized in the cost of the new asset.

Buildings designated as historical by the Texas Historical Commission are not depreciated unless used in the operations of the state. But, any improvement not deemed historical by the Texas Historical Commission is depreciated using the same methodology as any other improvement made to a building.

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
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