GASB
Posted:
October 28, 2003
Document author: Monika Knapp
Recently the GASB (Governmental Accounting Standards Board) issued a new pronouncement that will affect governmental financial statements. GASB statement 34 changes the presentation of the financial statements as well as what will go in them (i.e., how libraries will now be reported in their municipalities' financial statements).
The capitalization of assets and the impact on libraries
The most significant of the changes to affect libraries will be the capitalization of assets. According to GASB 34 paragraph 19, "Capital assets includes…all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period." Not only do library assets encompass the building and furniture, but also books, magazines, cds, etc., that are used in library operations and have a useful life longer than one year.
To capitalize an asset means that its cost is recognized in each of several years. For example: In previous years when Public Library purchased a book for $60.00, an expense of $60.00 would be shown on that year's financial statement. With the implementation of GASB 34, Public Library will purchase the same book for $60.00 and show an expense of $12.00 each year for the next 5 years, which is the estimated life of the book. ($60.00 / 5 = $12.00)
Determining the cost of current collections
I can already hear the next question. How in the WORLD do we retroactively restate the value of materials in our collection? Historical cost is the best way, and it can be determined in a number of ways. The first and most cumbersome way to determine historical cost would be to review the actual amounts paid for each asset. A second option would be to review the "sources and uses statement" of the borrowing documents if the project was funded by bonding (i.e. library building). Third, there are many indexing sources from professional and industry organizations that can be used to index the fixed asset if the year of acquisition or construction is known or can be estimated. Lastly, libraries may look to other libraries with similar assets to determine historical cost. Regardless of what method is used, libraries will need to take a complete inventory of all existing assets. In addition, fixed asset records will need to be established to track historical cost so that fixed asset additions, retirements and depreciation are recorded properly.
Plan of action to value collections and implement GASB 34
Now, how do you tackle the job of valuing your collections? Since this is probably the biggest job facing libraries (there are many other aspects to the implementation of GASB 34), the following list should help start you toward compliance with capital asset reporting requirements.
- Contact your municipality and determine when the implementation of GASB 34 will take place.
- Ask your municipal officials if they know how they would like you to tackle the recognition of library assets. They may be in the process of creating a management tool (i.e, barcoding) that will prevent you from having to take a full inventory of the library assets.
- If your municipality has determined that it will not perform an inventory or develop a management tool, determine what method you will use to retroactively value your collection.
- Identify a contact person in the library to spearhead the inventory process by developing a plan and determining what records are available.
- Using the same contact person, determine how you will track the purchase of new assets for future reporting purposes.
Summary
Each government unit is unique. And the implementation of GASB 34 is really a combined effort between the accounting/finance department of the unit and their respective auditors. Due to the relative newness of GASB 34 and the fact that it has not been implemented nationwide, I anticipate that we will start hearing more information as time passes. GASB will issue explanatory statements to clarify some of the points in their statement 34. Libraries will need to keep in contact with their municipalities if they wish to have a say in how their collections are capitalized.
In the meantime, I will continue to research GASB 34 and address the impact of it, not only on libraries, but also on library systems. Please feel free to contact me with ANY questions you may have.
Supporting public libraries in Outagamie and Waupaca counties