After studying this chapter you should understand:

  • Why and how governments account for capital assets in both fund and government-wide statements
  • Why and how governments account for transactions involving donated assets, trade-ins, and collectibles
  • GASB's controversial provisions regarding infrastructure
  • What special problems asset impairments create
  • Why investments in marketable securities may be of high risk and thereby present special problems of accounting and reporting

The accounting for both capital assets (sometimes referred to as “fixed” or “long-lived” assets) and investments, albeit for different reasons, should be of vital concern to statement users and preparers. Capital assets are a key component of many of the services provided by governments and not-for-profits. They include its police cars, administrative buildings, and utility lines and roads. If they are inadequate to meet the demands for services to be delivered in the future, then the organization will either have to reduce its services or come up with the financial resources to enhance the assets. At the same time, existing stocks of capital assets have to be either maintained or replaced, thereby necessitating an ongoing commitment of financial resources. In addition, the constituents of governments and not-for-profits generally want and are entitled to assurance that the organization ...

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