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State Property Accounting (SPA) Core Training

Lesson 2: SPA Asset Basics Transcript

Introduction

Welcome to the Fiscal Management training video for State Property Accounting Asset Basics. State Property Accounting is also referred to as SPA. After viewing this training, you should have a thorough understanding of:

  • The definition of assets in SPA
  • How assets are categorized

What is a Capital Asset?

The accounting definition of capital assets states capital assets are real, personal, or intangible property with an estimated life greater than one year.

The state of Texas has invested in a broad range of capital assets that are used in the state’s operations. Let’s briefly look at some examples of each of these different types of property.

For more detailed descriptions of the different types of capital assets, please refer to the SPA resource area on FMX.

Capital Assets: Real Property

Real property is described as land and the structures affixed to the land that cannot be removed. SPA categories for real property include:

  • Facilities and other improvements
  • Depreciable and non-depreciable infrastructure
  • Building and building Improvements
  • Land and land Improvements

Capital Assets: Personal Property

Personal property is described as any tangible property that is moveable and not classified as real property.

The factor used to distinguish personal property from real property is that personal property is movable. Personal property is not permanently fixed to one location, unlike real property that is a permanent fixture (i.e., land and buildings). SPA categories for personal property include:

  • Furniture and equipment
  • Vehicles, boats, and aircraft
  • Other assets
Examples of other capital assets include library books, works of art and historical treasures, leasehold improvements and livestock.

Capital Assets: Intangible Property

The Governmental Accounting Standards Board (GASB) Statement 51 Accounting and Financial Reporting for Intangible Assets, defines an intangible asset as one that lacks physical substance, is nonfinancial in nature and has an initial useful life extending beyond a single reporting period.

All identifiable intangible assets subject to the provisions of GASB 51 should be classified as capital assets and be reported on the government-wide statement of net assets.

An intangible asset is identifiable when the asset is either:

  • Capable of being separated or divided from the government or
  • Arises from contractual or legal rights.

The three SPA categories for Intangible property are:

  • Land use rights
  • Computer software
  • Other capital intangible assets

Land use rights include but are not limited to easements, mineral rights, timber rights, development rights or water rights.

Computer software is the most widely owned type of intangible capital asset. Computer software can be broken into two main categories, purchased or internally generated.

Other capital intangible assets include purchased or internally generated patents, copyrights, logos and trademarks.

How Are Assets Categorized?

The SPA system tracks assets in three categories:

  • Capitalized
  • Controlled
  • Inventoried

Within the inventoried section, there are agency controlled assets and assets that are simply tagged and tracked. Let’s discuss each of these categories in further detail.

Capitalized Assets

A capitalized asset is defined by the Comptroller as a capital asset that has a value equal to or greater than the capitalization threshold established for that asset type. Therefore, the threshold for the asset type determines materiality.

Capitalized assets are reported in an agency’s annual financial report.

Controlled Assets

A controlled asset is a capital asset that has a value less than the capitalization threshold established for that asset type. However, due to its high-risk nature, it is required to be reported to SPA.

Controlled assets are not reported in an agency’s annual financial report. However, they are included in each agency’s annual physical inventory. Let’s look at controlled assets in more detail.

Controlled Assets

Controlled assets are identified by class code. The first grouping of controlled assets is firearms, specifically class code 106 – Handguns, and class code 107 – Rifles. Firearms are controlled in the threshold of $0 to $4,999. Firearms with a value over $4,999 are capitalized.

Audio/Video equipment is also controlled; specifically class codes 129, 130 and 131 that refer to Stereo Systems, Cameras and TV/VCR/Camcorders, respectively. Assets in these class codes are considered controlled if their value is between $500 and $4,999.

Audio/Video assets with a value in excess of $4,999 are capitalized. Audio/Video assets with a value below $500 are classified in the SPA system as inventoried.

Controlled Assets

Computer equipment is classified as controlled if the balance is between $500 and $4,999.

Computer equipment assets with a value in excess of $4,999 are capitalized. Computer equipment assets with a value below $500 are classified as inventoried.

This category includes desktop computers, laptops, printers and data projectors:

  • 204 Desktop CPU – Not Apple
  • 208 Printers (not portable)
  • 214 Desktop CPU – Apple
  • 218 Data Projectors
  • 284 Portable CPU Laptop – Not Apple
  • 294 Portable Apple CPU Laptop

Locally Controlled Assets

A locally controlled asset is a capital asset that is not capitalized or on the controlled asset list but is tracked and accounted for as mandated by each agency’s internal management policy. Within SPA, these assets are classified as inventoried.

Inventoried Assets

An inventoried asset within SPA is an asset that is neither capitalized nor controlled but is tracked in SPA for inventory purposes. Inventoried assets also include the agency locally controlled assets.

Inventoried assets are not reported in an agency’s annual financial report and are not included in the agency’s annual physical inventory.

How are assets categorized?

Each of the categories discussed within the real, personal and intangible property types are consistent with the Annual Financial Reporting categories.

The Annual Financial Report, or AFR, lists the capital assets grouped according to common characteristics for reporting and tracking purposes.

The SPA grouping method is driven by class codes. Each asset type has a unique class code, and each class code is assigned to one of 12 AFR categories.

AFR Categories

This chart summarizes each of the 12 AFR categories and shows the related capital threshold established for each of the categories.

Category Description Threshold

1

Land and Land Improvements

$0

2

Buildings and Building Improvements

$100,000

3

Infrastructure, Depreciable

$500,000

4

Furniture and Equipment

$5,000

5

Vehicles, Boats and Aircrafts

$5,000

6

Construction in Progress

$0

7

Infrastructure, Non-Depreciable

$0

8

Other Assets (Works of Art & Historical Treasures, Libraries, Leasehold Improvements and Livestock)

Various

9

Facilities and Other Improvements

$100,000

A (11)

Land Use Rights (Intangible)

Various

B (12)

Computer Software (Intangible)

Various

C (13)

Other Capital Intangible Assets

$100,000

Class Codes

Capital assets purchased, constructed or donated that meet or exceed the Comptroller’s established capitalization threshold or minimum reporting requirements must be uniformly classified using the SPA class code structure.

In other words, the class code assigned to the asset determines the capitalization threshold for that asset.

A list of real, personal, intangible and controlled class codes is available on the SPA FMX website.

Class Codes

A class code is defined as a three-digit numerical representation used to link the following asset classification elements:

  • Default useful life (in months)
  • Description
  • Controlled status (Is the asset controlled?)
  • AFR category
  • Surplus group
  • Whether the asset is depreciable (Depreciable - Yes or No?)
  • Capitalization threshold
  • Default residual percentage

Class Codes

This slide is a charted representation of all elements that class codes link together. As you can see, the assigned class code is what determines the AFR category. For example, note that the threshold for class code 084 – AFR category 3 is $500,000.

Class
Code
Useful
Life
(Mos)
Class Code
Description
Ctrl
Asset
AFR
Catg
Srpl
Grp
DPRC? Cap
Thresh
Rsdl
PC
001 0 LAND & LAND IMPROVEMENT 1 MSC N 0 0
031 360 BUILDING EXTERIOR: BUILDING SHELL 2 MSC Y 100,000 5>
084 192 INF: AIRPORT 3 MSC Y 500,000 0
101 120 DESKS 4 DSK Y 5,000 0
129 84 STEREO SYSTEMS Y 4 AUD Y 5,000 0
179 84 OFFICE MACHINES 4 OFF Y 5,000 0
701 60 PASSENGER CARS – SEDANS, STATION WAGONS 5 VEH Y 5,000 0
284 48 PORTABLE COMPUTER – NOT APPLE Y 4 CPU Y 5,000

0

Conclusion

Thank you for viewing this presentation. This concludes the SPA Asset Basics training.

For more SPA training and other Fiscal Management training opportunities, log on to Training Center on FMX.


Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
Comptroller.Texas.Gov | FMX
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