2023 GASB Standards on Infrastructure Reporting

The Governmental Accounting Standards Board (GASB) has introduced new standards in 2023 that significantly impact how public sector entities report on infrastructure assets. These changes aim to enhance transparency and consistency, providing stakeholders with a clearer view of an entity’s financial health.

This shift is crucial as it addresses the growing need for detailed asset management and accountability in government operations. By refining the reporting process, GASB ensures that financial statements more accurately reflect the true value and condition of infrastructure investments.

Key Changes in GASB Statements for 2023

The 2023 updates to the GASB standards introduce several significant modifications that directly affect the reporting of infrastructure assets. One of the most notable changes is the introduction of a more nuanced approach to asset valuation. This approach mandates that public entities must now incorporate environmental and economic factors when assessing the value of their infrastructure assets. This adjustment ensures that the reported values are more reflective of current market conditions and potential future benefits.

Additionally, the new standards require enhanced narrative disclosures regarding the methodologies used in the valuation of infrastructure assets. Entities must now provide a detailed explanation of the techniques and assumptions used in their valuation models. This requirement aims to increase the transparency of the financial statements and allows stakeholders to better understand the basis of the reported figures.

The standards also extend the scope of infrastructure assets that need to be reported. Previously, certain assets might have been excluded due to their perceived insignificance or due to the complexity involved in their valuation. The 2023 standards eliminate these exemptions, mandating a more comprehensive asset reporting. This change ensures that all assets, regardless of their size or complexity, are accounted for, providing a fuller picture of an entity’s capital resources.

Reporting Requirements for General Infrastructure Assets

The 2023 GASB standards not only refine how infrastructure assets are valued but also redefine the reporting requirements to ensure a more detailed and accurate representation of these assets in financial statements. These requirements are structured to enhance the clarity and comparability of reports across different governmental entities.

Initial Measurement

Under the new GASB standards, the initial measurement of general infrastructure assets must now include both historical cost and any additional expenditures that bring the asset to its present location and condition for its intended use. This includes costs directly attributable to installation, construction, and acquisition. For assets acquired through non-exchange transactions, such as donations, the fair value at the time of acquisition should be reported. This approach aligns with the GASB’s commitment to providing a true and fair view of the asset’s value at the point of recognition, thereby aiding stakeholders in understanding the economic resources and potential obligations of the reporting entity.

Subsequent Measurement

For subsequent measurement, the 2023 standards introduce a requirement for annual assessments of the infrastructure assets to determine if there has been any impairment in their value. If an asset is deemed to be impaired, the loss must be measured and reported based on the diminished service utility of the asset, which could be due to physical damage, obsolescence, or other factors. This assessment ensures that the financial statements continue to reflect the current value and condition of the assets, thus providing stakeholders with up-to-date information. The standards also allow for the application of a modified approach for certain eligible infrastructure assets, where governments can opt to maintain the assets at a specified condition level instead of depreciating them.

Depreciation Methods

The 2023 GASB standards specify that the depreciation of infrastructure assets should be systematically charged to expense over the estimated useful life of the asset, reflecting the consumption of the asset’s economic benefits. The choice of depreciation method (straight-line, diminishing balance, or units of production) should reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity. This methodological choice must be disclosed in the financial statements along with the rationale for its selection, ensuring that stakeholders have a clear understanding of how the depreciation expense is calculated and the impact it has on the financial position of the entity.

Disclosure Requirements for Capital Assets

The GASB’s 2023 standards mandate comprehensive disclosures regarding capital assets, including infrastructure, to ensure that financial reports provide a complete and transparent picture of an entity’s investment in capital assets. These disclosures are designed to furnish users of financial statements with information that is not only relevant but also helpful for making economic decisions and assessing accountability.

Entities are now required to disclose the general policies governing the use and maintenance of their capital assets. This includes the entity’s capitalization policy, which outlines the threshold above which an asset is defined as a capital asset and is thus subject to capitalization. Additionally, the disclosure must include the entity’s policy for preserving asset functionality, which may involve regular maintenance schedules or targeted investment strategies. This information is crucial for stakeholders to understand how the entity manages and invests in its capital assets over time.

The disclosure requirements extend to encompass the composition of capital assets. Entities must break down their capital assets by major class or category, such as buildings, machinery, equipment, and infrastructure. This classification provides a clearer understanding of the types of assets the entity holds and the diversity of its capital asset portfolio. Furthermore, the disclosure of accumulated depreciation by major class offers insight into the aging and investment in renewal of the capital assets, which is indicative of the entity’s future capital needs and its ability to sustain its service capacity.

The GASB standards also call for the disclosure of the amount of interest capitalized during the construction phase of capital assets. This figure represents the cost of financing the construction of capital assets and is a direct addition to the cost of the asset. By requiring this disclosure, the GASB ensures that users of the financial statements are aware of the total investment in a capital asset, including associated borrowing costs.