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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
Testing for Significance of an Impairment

Test capital assets for impairment when a damaging event or changing circumstance becomes apparent. The total decline in service value of the affected assets must be greater than $500,000 for an event to qualify for the reporting of an impairment loss under GASB 42.

Per GASB 42, two factors must exist for an event to be reportable as an impairment. The decline in service utility must be:

  1. Significant — given reduced service utility, the cost of continuing operation and maintenance or of restoration is significant
  2. Unexpected — the life cycle of the capital asset would not normally include the cost of restoration or of added expense for operation and maintenance

If it becomes apparent that the assets may be impaired but fail to meet the above criteria, reevaluate the depreciable factors. Apply the changes in estimate (such as estimated useful life and residual value) on a prospective basis.

Glenn Hegar
Texas Comptroller of Public Accounts
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