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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Reporting Requirements for Annual Financial Reports of State Agencies and Universities

Capital Assets

Impairment of Capital Assets and Insurance Recoveries
Measuring Impairment Amount

To determine the impairment amount to write off, choose a method that suits the damaging event or change in circumstances that impaired the capital asset.

If the agency will continue to use the asset, refer to the table below. This table depicts the method generally used to each type of impairment.

Type of Impairment Method Summary
Physical damage Restoration Cost

Note: This is the easiest method to apply and the most common.

Estimates the cost to restore the asset to its original utility (not including general improvements and additions) and calculates the impairment amount by applying:
  • An appropriate cost index
  • A ratio (estimated restoration cost over estimated replacement cost)
  • New laws or regulations
  • Environmental changes
  • Technological developments
  • Obsolescence
Service Units Isolates the historical costs of lost service utility
Change in the manner or duration of use Deflated Depreciated Replacement Cost
Service Units
Bases impairment amount on replacement cost after:
  • Depreciating it to reflect that the asset is not new
  • Deflating it to convert it to historical values

If the agency will no longer use the asset or if the impairment is due to construction stoppage, report the asset at the lower of carrying value or fair value.

Glenn Hegar
Texas Comptroller of Public Accounts
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