SPA Process User’s Guide –
Chapter 1 – Introduction to Capital Assets
Infrastructure is a long-lived capital asset that normally is stationary in nature and can be preserved for significantly more years than most capital assets. Infrastructure assets are often linear and continuous.
Note: Prospective reporting of general infrastructure assets was required beginning in fiscal 2002. Also required was the retroactive reporting of infrastructure assets purchased, constructed or donated in fiscal years ending after June 30, 1980, or infrastructure assets that received major renovations, restorations or improvements during that period. State entities are encouraged to report their 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 should be capitalized and recorded as an addition of value to the infrastructure if the improvement or additional value meets the capitalization threshold.
Jointly Funded Infrastructure
If ownership cannot be determined for infrastructure paid for jointly by the state and other governmental entities, the entity responsible for future maintenance should capitalize it.
Modified Approach vs. Depreciation
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 and
- documentation shows that the assets are being preserved at or above a condition level established by the government.
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.
Maintenance Costs allow an asset to continue to be used during its originally established useful life. Maintenance costs are expensed in the period incurred.
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 its capacity or efficiency. Preservation costs are expensed under the modified approach and capitalized under the depreciation approach.
Additions and Improvements
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 (i.e. more lanes can be added to a highway or the weight capacity of a bridge can be increased). A change in efficiency maintains the same service level, but at a reduced cost (i.e. a heating and cooling plant could be reengineered so that it produces the same temperature changes at reduced cost). The cost of additions and improvements are capitalized and reported under both the modified and depreciation approaches.
The straight-line depreciation method (historical cost minus residual value, divided by useful life) is used for infrastructure assets.
The capitalization threshold for depreciable infrastructure is $500,000 and non-depreciable infrastructure is $0. Infrastructure already capitalized remains capitalized.
Examples of Expenditures to Capitalize as Infrastructure
- Highway and rest areas
- Roads, streets, curbs, gutters, sidewalks, fire hydrants
- Bridges, railroads, trestles
- Canals, waterways, wharf, docks, sea walls, bulkheads, boardwalks
- Dam, drainage facility
- Radio or television transmitting tower
- Electric, water and gas (main lines and distribution lines, tunnels, etc.)
- Fiber optic and telephone distribution systems (between buildings)
- Light system (traffic, outdoor, street, etc.)
- Airport runway, strip, taxiway or apron