Reporting Requirements for Annual Financial Reports of State Agencies and Universities
Capital Asset Categories
Infrastructure consists of long-lived capital assets that are normally stationary in nature and can be preserved for a significantly greater number of years than most capital assets. Infrastructure assets are often linear and continuous.
Prospective reporting of general infrastructure assets with a value of $500,000 or more is required. Also required is the retroactive reporting of:
- Infrastructure assets purchased, constructed or donated in fiscal years ending after June 30, 1980
- Infrastructure assets that received major renovations, restorations or improvements in fiscal years ending after June 30, 1980
Each agency is encouraged to report its entire infrastructure, if possible.
Infrastructure improvements are capital events that materially extend the useful life or increase the value of the infrastructure, or both. Infrastructure improvements are capitalized and recorded as an addition of value to the infrastructure if the improvement or additional value meets the capitalization threshold.
If ownership cannot be determined for infrastructure paid for jointly by multiple parties (the state of Texas and other governmental entities), the party responsible for future maintenance must capitalize it.
The modified approach is an alternative to reporting depreciation for infrastructure assets that meet the following criteria:
- The assets are managed using a qualifying asset management system
- Documentation shows the assets are being preserved at or above a condition level established by the state
Depreciation is not reported for infrastructure assets reported using the modified approach. Only infrastructure assets that comprise a network or subsystem of a network can be reported using the modified approach.
Infrastructure assets can have three types of costs:
- Maintenance costs allow an asset to continue to be used during its originally established useful life. Maintenance costs are expensed in the period incurred regardless of the amount of the expense.
- Preservation costs are generally considered to be outlays that extend the useful life of an asset beyond its original estimated useful life but do not increase the capacity or efficiency of the asset. Preservation costs are expensed under the modified approach and capitalized under the depreciation approach if they meet the capitalization threshold.
- Additions and improvements are capital outlays that increase the capacity or efficiency of the asset. A change in capacity increases the level of service provided by an asset. For example, additional lanes can be added to a highway or the weight capacity of a bridge could be increased. A change in efficiency maintains the same service level but at a reduced cost. For example, a heating and cooling plant could be reengineered so it produces the same temperature changes at reduced cost. The cost of additions and improvements are capitalized under both the modified and depreciation approaches to reporting infrastructure if they meet the capitalization threshold.
Examples of expenditures to be capitalized as infrastructure:
- Highways and rest areas
- Roads, streets, curbs, gutters, sidewalks and fire hydrants
- Bridges, railroads and tressels
- Canals, waterways, wharf, docks, sea walls, bulkheads and boardwalks
- Dams, drainage facilities
- Radio or television transmitting towers
- Electric, water and gas (main lines, distribution lines and tunnels)
- Fiber optic and telephone distribution systems (between buildings)
- Light systems (traffic, outdoor, street, etc.)
- Airport runway/strip/taxiway/apron