The Government Accounting Standards Board (GASB) has issued two new standards which will require governmental entities to recognize and report depreciation on capital assets on their financial statements. The new standards for financial reporting are known as

GASB Statement 34 Basic Financial Statements–and Management's Discussion and Analysis–for State and Local Governments and

GASB Statement 35 Basic Financial Statements–and Management's Discussion and Analysis–for Public Colleges and Universities

According to Tom Allen, GASB Chairman, this change in reporting is "…the most significant change to occur in the history of governmental financial reporting."

The new GASB standards require many governmental entities to develop depreciation schedules for capital assets including infrastructure, buildings and improvements, machinery and equipment, and vehicles in order to provide financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP). For most entities, retroactive reporting to June 30, 1980 will be required.

Depreciation is no simple matter. For the first time, many financial statement preparers will have to gather and maintain fixed asset records, determine assets acquisition dates and useful lives, and depreciate those assets according to very specific guidelines and schedules. Many entities will find the need to implement new systems or alter existing systems in order to capture the necessary information.

Conversion to the depreciation method of accounting for capital assets requires a complete review of the asset records. Both the GASB and auditors expect the depreciation schedules to be the result of an institutional analysis and not a copy of another organization's practices. The monetary and human resources required for this exercise are substantial. After initial implementation, the additions and disposals are appended to the file during our yearly update. The files are kept current through these updates.

Implementing Statements 34 and 35 will take a great deal of study, professional judgment, and above all: time. Hirons & Associates can provide you with professional advice, assistance in the study of your assets, and complete depreciation reports that are easy to use, access, and update from anywhere at anytime.

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