1. GFOA November 5, 2004 Fixed Asset Accounting - Proposals

2. PS 3150 Tangible Capital Assets Significant benefits to be gained by having common definitions, measurements and accounting and financial reporting Expected significant amendments to PS 1700 and PS 1800 (the key drivers of current model) Once agreement has been reached, PSAB will address the issue of the reporting model

3. PS 3150 Tangible Capital Assets The need to change: PS 1800.41 requires TCAs to be written off in the period acquired PS 1700.106/.113 only defines financial assets/liabilities PS 1800.33 and.36 do not include the use of TCAs as part of costs

4. PS 3150 Tangible Capital Assets Start by defining a TCA TCAs are non-financial assets having physical substance that meet ALL of the following: held for use, for rental to others, for administrative or maintenance of other acquired, constructed or developed economic useful lives not intended for sale

5. PS 3150 Tangible Capital Assets Tangible capital assets should be accounted for and reported as assets in the statement of financial position “contributed” assets included at fair values the stock needs to complete

6. PS 3150 Tangible Capital Assets Measurement at historical cost Replacement cost results in revaluation adjustments and back-logged depreciation Fair value results in revaluation adjustments with adjustment to expense Need estimates of historical costs

7. PS 3150 Tangible Capital Assets Need to define the cost to be reported Cost is the amount of consideration given up to acquire, construct or better and includes costs directly attributable to the asset including carrying costs such as installation Cost of contributed assets = fair value

8. PS 3150 Tangible Capital Assets Accounting for the use Renewals does not indicate assets are being consumed Amortization should be accounted for as expense in the statement of operations in a rationale and systematic manner Cost less any residual value

9. PS 3150 Tangible Capital Assets Write-downs Determining when to write down i.e., how the asset is used, technological developments, physical damage, removal decline in service Determining the amount is an issue the private uses cash flows but public sector reflects service potential and how to measure Permanent decline in value no reversal of write-down

10. PS3150 Tangible Capital Assets Disposals Difference between proceeds and carrying value goes to revenue or expense

11. PS 3150 Tangible Capital Assets Other issues Betterments and maintenance – improvements life or capacity Asset condition assessments Asset management plans

12. Preparing for TCA Inventory of all TCAs Valuation of TCAs – Cost and NBV Estimates remaining economic useful life Depreciation rates established locally Capitalization threshold depending on size Components approach for recording the stock