GASB 51 – Time to implement new standard
Posted 12-1-2010 | By David Mol | Download Article
Governmental Accounting Standards Board (GASB) Statement No. 51 Accounting and Financial Reporting for Intangible Assets is effective for calendar years ending December 31, 2010. GASB 51 requires that all intangible assets not specifically excluded, such as capital leases and goodwill, be classified as capital assets.
Some government entities capitalized common intangible assets such as easements and computer software upon the implementation of GASB 34. Those that did not include these intangible assets on their financial statements in the past are now required to not only capitalize intangible assets acquired in 2010, but also retroactively report certain easements and computer software costs. Below, we’ve highlighted a few important implementation notes:
- Temporary easements – All temporary easements with a life exceeding one year should be capitalized and amortized over the estimated useful life. Retroactive reporting of temporary easements acquired in fiscal years ending after June 30, 1980 is required for GASB 34 phase 1 and 2 governments and encouraged for GASB 34 phase 3 governments. A government can reduce effort in this area by establishing a capitalization threshold for easements that limits the number that require capitalization to only those considered material and/or are grantor imposed.
- Retroactive reporting – Retroactive reporting of intangible assets having an indefinite useful life (permanent easements) and internally generated software is not generally required but is permitted. Footnote disclosure is required whenever standards allow a choice between various options. The government’s policy for retroactively reporting intangible assets should be added to the capital asset disclosures for the December 31, 2010 financial statements.
- Computer software – Software (including web sites) is an intangible asset when purchased, licensed, donated or internally generated. Retroactive reporting of non- internally generated computer software is required for GASB 34 phase 1 and 2 governments and encouraged for phase 3 governments. Each government should determine whether they have non-internally generated computer software requiring retroactive reporting. Establishing a capitalization threshold to reduce effort in this area also should be considered.
- Internally generated computer software – Software is considered to be internally generated if it is created by the government or if it is acquired from a third party but requires more than a minimal incremental effort (modifications) by the government. GASB 51 establishes three stages for internally generated software to determine whether activity is expensed or capitalized. It is essential for proper reporting to establish a mechanism to track both internal and external costs requiring capitalization.
If you would like to further discuss GASB 51, please contact David Mol, CPA, at dmol@hlbtr.com or Peggy Moeller, CPA, at pmoeller@hlbtr.com.