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Glenn Hegar  ·  Texas Comptroller of Public Accounts

Depreciating Professional, Academic, and Research Library Books and Materials

FPP N.006


In fiscal 2002, Governmental Accounting Standards Board (GASB) Statement No. 34 – Basic Financial Statements and Management’s Discussion and Analysis for State and Local Governments was implemented. At that time, the Texas Comptroller of Public Accounts established various line items for the Annual Financial Report (AFR) Capital Asset Note, including Other Capital Assets. This line item was used to report professional, academic and research library books and materials. It was placed in the Non-Depreciable Assets section because libraries were considered inexhaustible assetsGASB’s term for assets whose economic benefit or service potential is used up so slowly that their estimated useful lives are extraordinarily long. Works of art and historical treasures, for example, are inexhaustible assets.

Later, the GASB 34/35 Implementation Guide recommended the depreciation of most library books, and practice has evolved to follow suit. Therefore, to be consistent with current industry standards, a change in classification is needed.

Annual financial reporting

Beginning with fiscal 2005, AFRs show library books and materials in the Depreciable Assets section of the Capital Asset Note, again under a line item titled “Other Capital Assets.”

Accounting for depreciation not previously reported

In fiscal 2005, reflect depreciation not previously reported as an adjustment to Beginning Fund Balance in the AFR Capital Asset Note. The adjustment should equal Accumulated Depreciation as of Aug. 31, 2004.

Record depreciation expense for the current year using comptroller object code 7939.

Previously capitalized items remain capitalized

Assets already capitalized will remain capitalized, but purchases made after September 2005 will have a $5,000 capitalization threshold.

Collections with cultural, aesthetic or historical value

Class Code 752 is used for works of art, rare books and other collections with cultural, aesthetic or historical value. These items are normally protected and more rigorously preserved than other books. They are considered to be inexhaustible resources and will not be depreciated. Continue to report them under Non-Depreciable Assets in the Capital Asset Note.

Items under Class Code 752 that are not historical, artistic and cultural treasures were moved to Class Code 751. Both these class codes have new descriptions.

Class Code Old Description New Description Depreciate?
751 Books and Reference Materials Books, Book Collections and Reference Materials Yes
752 Library Books & Reference Materials Works of Art & Historical Treasures – Books and Book Collections No

Componentizing library assets

State entities will need to establish a component number for each fiscal year layer of library additions. (See Example: Componentizing and Calculating Average Cost per Volume PDF.)

Note: This does not include Class Code 752 items because they are not depreciable.

This will allow you to report depreciation accurately by fiscal year. If records are available, establish a component number for each fiscal year beginning with fiscal 1990. If you cannot make changes to your library property in the State Property Accounting System (SPA) before the due date of your AFR, you may provide estimates of accumulated depreciation and depreciation expense; however, in this case, you must have your library property updated no later than March 1, 2006.

Reporting disposals

Dispose of library books and materials using an average cost per item and the “FIFO” method — first in, first out. That is, exhaust the component value in the earliest fiscal year before posting disposals to the next fiscal year component.

To determine the value of disposals to record at year-end, calculate an average cost per item:

(ending balance of library books) / (number of volumes held)

See Example: Componentizing and Calculating Average Cost per Volume PDF.

Net adjustments (additions minus disposals) to a fiscal year are not allowed.

For more information

If you have questions, please contact your financial reporting analyst or your SPA analyst.

Glenn Hegar
Texas Comptroller of Public Accounts
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