Project Pages

Classification of Nonfinancial Assets

Poject Description: The objective of this project would be to reconsider the existing classification of nonfinancial assets and other related sub-classifications (for example, capital assets or intangible assets) to ensure that (1) assets are classified in a way that provides the most relevant financial information and (2) the definitions of the classifications are understandable and appropriate to meeting financial reporting objectives. The project also would consider how any classification changes would affect financial statement presentation and disclosure of nonfinancial assets. The project would not, however, reexamine recognition or measurement of nonfinancial assets.

Status: Added to Agenda

Classification of Nonfinancial Assets—Project Plan

Background: The term nonfinancial asset (or assets) appears several times in GASB literature. Generally, when that term is used, the example provided is capital assets broadly or a specific type of capital asset. Paragraph B7 of the Basis for Conclusions to Statement No. 87, Leases, described nonfinancial assets as a broader category than capital assets; however, the delineation between the two is not clear in existing literature.
Additionally, since the issuance of Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, as amended, intangible assets have been included in the definition of capital assets. More recently, the Board has classified certain right-to-use intangible assets that result from recognition guidance in Statement 87, Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, and Statement No. 96, Subscription-Based Information Technology Arrangements, as capital assets, in part due to the Statement 34 inclusion of intangible assets within capital assets.
The existing description of capital assets in paragraph 19 of Statement 34 says that capital assets are those that are “…used in operations…” However, reported capital assets may contain certain items that are not being used in operations because they did not meet the definition of an investment found in paragraph 64 of Statement No. 72, Fair Value Measurement and Application, at acquisition.

In the most general sense of the term, nonfinancial assets are pervasive among governments—virtually every government reports some type of nonfinancial asset. Nonfinancial assets other than tangible capital assets used in operations, which would be the primary focus of the project, also are pervasive among governments as evidenced by a survey of financial statement preparers conducted during pre-agenda research. Although many other nonfinancial assets (other than tangible capital assets used in operations) are relatively small in magnitude, some are more significant.
During pre-agenda research, respondents to a survey of financial statement users generally considered distinctions between types of nonfinancial assets to be important. A significant number of user respondents indicated that they use information about tangible capital assets used for service in a manner different from their use of information about tangible capital assets held for sale. Many respondents indicated that they also use information in a different manner for other pairs of assets identified in the survey: (1) tangible and intangible capital assets and (2) leased and owned assets. Respondents to that survey stated that information that distinguishes between those types of assets is important, primarily because they either analyze it differently or use it to inform different decisions or assessment of accountability. Reconsidering nonfinancial asset classifications in a comprehensive manner should result in improvements to the information provided in financial statements.

Accounting and Financial Reporting Issues: The following issues would be considered:
  1. How should the existing definitions of nonfinancial assets and capital assets be modified, if at all? Should new classifications be added?
    • Should right-to-use intangible assets resulting from Statements No. 87, Leases, No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, and No. 96, Subscription-Based Information Technology Arrangements, continue to be classified as capital assets?
    • Should other intangible assets addressed in Statement No. 51, Accounting and Financial Reporting for Intangible Assets, continue to be classified as capital assets?
    • Should other types of assets, such as capital assets held for resale, continue to be classified as capital assets?
  2. If classifications are added, how should those classifications be defined?
  3. If classifications are added and defined or existing definitions or classifications are modified, what should be the effect, if any, on presentation within the statement of net position or disclosure in notes to financial statements?
Project History:
  • Pre-agenda research proposed: August 2020
  • Consultative group appointed? No
  • Research results reported to the Board: July 2021
  • Added to the current technical agenda: August 2021
Current Developments: The staff completed the collection of archival data and conducted a user survey to better understand user information needs.

Work Plan:
Board Meetings Topics to Be Considered
July–October 2022 Schema for classifying nonfinancial assets and implications for existing guidance.
November 2022 Definitions of classifications.
January 2023 Reporting and disclosure implications of classifications.
February 2023 Review first draft of standards section of a proposed Statement; cost-benefit considerations.
April 2023 Review preballot draft of an Exposure Draft of a proposed Statement.
May 2023 Review ballot draft of an Exposure Draft of a proposed Statement and consider for approval.
May–August 2023 Comment period.
September–December 2023 Redeliberations based on respondent feedback.
January 2024 Review preballot draft of a final Statement.
March 2024 Review ballot draft of a final Statement and consider for approval.

Classification of Nonfinancial Assets—Recent Minutes


Classification of Nonfinancial Assets—Tentative Board Decisions to Date