Classification of Nonfinancial Assets
Project 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 will consider how any classification changes would affect financial statement presentation and disclosure of nonfinancial assets. The project will not, however, reexamine recognition or measurement of nonfinancial assets.
Status: Initial Deliberations
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:
Work Plan:
Minutes of Meetings, August 9–10, 2023
The Board reviewed a preballot draft of an Exposure Draft of a proposed Statement, Disclosure and Classification of Certain Capital Assets, and discussed clarifying edits. The Board directed the project staff to prepare a ballot draft of an Exposure Draft for discussion at the September 2023 Board meeting.
Minutes of Meetings, June 27–29, 2023
The Board began its deliberations by discussing the transition and effective date of the proposed guidance. First, the Board tentatively decided that transition provisions should require retroactive application. The Board then tentatively decided to propose an effective date of fiscal years beginning after June 15, 2025, and encourage earlier application.
The Board reviewed a draft of the Standards and Effective Date and Transition sections of an Exposure Draft and discussed clarifying edits. The Board tentatively decided to disclose certain types of capital assets separately without specifying them as a major class. Additionally, the Board tentatively decided that capital assets held for sale should be reported by major class of capital asset and should not be limited to tangible capital assets.
Next, the Board discussed whether the expected benefits to users and other stakeholders resulting from the application of the proposed requirements would justify the perceived costs to preparers and other stakeholders of implementation and ongoing compliance. The Board tentatively decided that the expected benefits would justify the perceived costs.
The Board then discussed the characteristics of the accounting and financial reporting information that would result from the provisions of the proposed guidance and whether the proposed requirements are within the scope of the GASB’s authority. The Board tentatively decided that the proposed requirements would meet all the characteristics of Group 1 and, therefore, are within the scope of the GASB’s authority.
Lastly, the Board directed the project staff to prepare a preballot draft of an Exposure Draft for discussion at the August 9, 2023 Board meeting.
Minutes of Meetings, May 16–17, 2023
The Board discussed whether and, if so, how to define the term nonfinancial asset in this project. The Board tentatively decided not to define that term.
Minutes of Meetings, April 4, 2023
The Board discussed the definition of the term held for sale. The Board tentatively decided on two criteria that must be met in order to classify a capital asset as held for sale: (1) the government has decided to sell the asset and (2) it is probable that the sale will occur within one year of the financial statement date. The Board tentatively decided neither to use nor define the term disposal group within the held for sale criteria. The Board discussed whether to include exceptions to the timeframe criterion and tentatively decided not to include any such exceptions. The Board also considered whether to include an exception for newly acquired assets and tentatively decided not to include such an exception.
The Board tentatively agreed to include two items as factors to consider in evaluating whether it is probable that the sale will occur within one year: (1) the asset is available for immediate sale in its present condition and (2) an active program to locate a buyer has been initiated, incorporating the idea of an asset being put out for bid. The Board tentatively decided not to include the following as either requirements or factors to consider: (a) the asset being marketed at a reasonable price and (b) the likelihood of significant changes to the plan to sell the asset.
The Board then tentatively decided that (1) market conditions for the type of asset and (2) regulatory approvals needed to sell the asset should be included as factors to consider when evaluating whether it is probable that the sale will occur. The Board also tentatively decided to develop additional factors to consider in evaluating whether it is probable that the sale will occur.
Minutes of Meetings, January 11–12, 2023
The Board began deliberations by discussing the terminology to describe capital assets held for sale. The Board tentatively decided to use and define the term held for sale.
Next, the Board discussed the definition of the term held for sale. The Board tentatively decided to develop a definition of capital assets held for sale similar to the criteria established by the FASB but modified for governments. The Board will discuss a new definition at a future meeting.
The Board then discussed the reclassification of a capital asset held for sale if it no longer meets the definition of held for sale. The Board tentatively decided to allow an asset that has been classified as held for sale to be reclassified as used for service if the usage of the asset changes.
Minutes of Meetings, November 16–18, 2022
The Board began deliberations by discussing the classification of nonfinancial investments and financial investments. The Board tentatively decided not to require separate presentation on the face of the financial statements or add any new disclosure requirements.
The Board then discussed the classification of receivables for nonfinancial assets and other receivables. The Board tentatively decided not to require separate classification.
Minutes of Meetings, October 11–12, 2022
The Board began deliberations by discussing the classification of intangible lease assets and tangible owned capital assets. The Board tentatively decided that intangible lease assets should be classified separately from tangible owned capital assets by requiring them to be reported by major classes separate from major classes of tangible capital assets.
The Board then discussed the classification of right-to-use intangible assets and right-to-use tangible assets. The Board tentatively decided that right-to-use assets recognized for subscription-based information technology arrangements should be classified separately from other capital assets. Next, the Board tentatively decided that assets representing the right to use intangible underlying assets, other than subscription-based information technology arrangements, should not be classified separately from assets representing the right to use tangible underlying assets. Finally, the Board tentatively decided that assets representing the right to use intangible underlying assets should be classified separately from owned intangible assets.
Minutes Archive
The Board tentatively decided the following:
Project 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 will consider how any classification changes would affect financial statement presentation and disclosure of nonfinancial assets. The project will not, however, reexamine recognition or measurement of nonfinancial assets.
Status: Initial Deliberations
- Background
- Accounting and Financial Reporting Issues
- Project History
- Current Developments
- Work Plan
- Recent Minutes
- Minutes Archive
- Tentative Decisions to Date
- Project staff:
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:
- 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?
- If classifications are added, how should those classifications be defined?
- 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?
- Pre-agenda research approved: August 2020
- Consultative group appointed? No
- Research results reported to the Board: July 2021
- Added to the current technical agenda: August 2021
- Deliberations began: July 2022
Work Plan:
| Board Meetings | Topics to Be Considered |
| September 2023 | Review ballot draft of an Exposure Draft of a proposed Statement and consider for approval. |
| October–December 2023 | Comment period. |
| March–April 2024 | Redeliberations based on respondent feedback. |
| May 2024 | Review preballot draft of a final Statement. |
| June 2024 | Review ballot draft of a final Statement and consider for approval. |
Classification of Nonfinancial Assets—Recent Minutes
Minutes of Meetings, August 9–10, 2023
The Board reviewed a preballot draft of an Exposure Draft of a proposed Statement, Disclosure and Classification of Certain Capital Assets, and discussed clarifying edits. The Board directed the project staff to prepare a ballot draft of an Exposure Draft for discussion at the September 2023 Board meeting.
Minutes of Meetings, June 27–29, 2023
The Board began its deliberations by discussing the transition and effective date of the proposed guidance. First, the Board tentatively decided that transition provisions should require retroactive application. The Board then tentatively decided to propose an effective date of fiscal years beginning after June 15, 2025, and encourage earlier application.
The Board reviewed a draft of the Standards and Effective Date and Transition sections of an Exposure Draft and discussed clarifying edits. The Board tentatively decided to disclose certain types of capital assets separately without specifying them as a major class. Additionally, the Board tentatively decided that capital assets held for sale should be reported by major class of capital asset and should not be limited to tangible capital assets.
Next, the Board discussed whether the expected benefits to users and other stakeholders resulting from the application of the proposed requirements would justify the perceived costs to preparers and other stakeholders of implementation and ongoing compliance. The Board tentatively decided that the expected benefits would justify the perceived costs.
The Board then discussed the characteristics of the accounting and financial reporting information that would result from the provisions of the proposed guidance and whether the proposed requirements are within the scope of the GASB’s authority. The Board tentatively decided that the proposed requirements would meet all the characteristics of Group 1 and, therefore, are within the scope of the GASB’s authority.
Lastly, the Board directed the project staff to prepare a preballot draft of an Exposure Draft for discussion at the August 9, 2023 Board meeting.
Minutes of Meetings, May 16–17, 2023
The Board discussed whether and, if so, how to define the term nonfinancial asset in this project. The Board tentatively decided not to define that term.
Minutes of Meetings, April 4, 2023
The Board discussed the definition of the term held for sale. The Board tentatively decided on two criteria that must be met in order to classify a capital asset as held for sale: (1) the government has decided to sell the asset and (2) it is probable that the sale will occur within one year of the financial statement date. The Board tentatively decided neither to use nor define the term disposal group within the held for sale criteria. The Board discussed whether to include exceptions to the timeframe criterion and tentatively decided not to include any such exceptions. The Board also considered whether to include an exception for newly acquired assets and tentatively decided not to include such an exception.
The Board tentatively agreed to include two items as factors to consider in evaluating whether it is probable that the sale will occur within one year: (1) the asset is available for immediate sale in its present condition and (2) an active program to locate a buyer has been initiated, incorporating the idea of an asset being put out for bid. The Board tentatively decided not to include the following as either requirements or factors to consider: (a) the asset being marketed at a reasonable price and (b) the likelihood of significant changes to the plan to sell the asset.
The Board then tentatively decided that (1) market conditions for the type of asset and (2) regulatory approvals needed to sell the asset should be included as factors to consider when evaluating whether it is probable that the sale will occur. The Board also tentatively decided to develop additional factors to consider in evaluating whether it is probable that the sale will occur.
Minutes of Meetings, January 11–12, 2023
The Board began deliberations by discussing the terminology to describe capital assets held for sale. The Board tentatively decided to use and define the term held for sale.
Next, the Board discussed the definition of the term held for sale. The Board tentatively decided to develop a definition of capital assets held for sale similar to the criteria established by the FASB but modified for governments. The Board will discuss a new definition at a future meeting.
The Board then discussed the reclassification of a capital asset held for sale if it no longer meets the definition of held for sale. The Board tentatively decided to allow an asset that has been classified as held for sale to be reclassified as used for service if the usage of the asset changes.
Minutes of Meetings, November 16–18, 2022
The Board began deliberations by discussing the classification of nonfinancial investments and financial investments. The Board tentatively decided not to require separate presentation on the face of the financial statements or add any new disclosure requirements.
The Board then discussed the classification of receivables for nonfinancial assets and other receivables. The Board tentatively decided not to require separate classification.
Minutes of Meetings, October 11–12, 2022
The Board began deliberations by discussing the classification of intangible lease assets and tangible owned capital assets. The Board tentatively decided that intangible lease assets should be classified separately from tangible owned capital assets by requiring them to be reported by major classes separate from major classes of tangible capital assets.
The Board then discussed the classification of right-to-use intangible assets and right-to-use tangible assets. The Board tentatively decided that right-to-use assets recognized for subscription-based information technology arrangements should be classified separately from other capital assets. Next, the Board tentatively decided that assets representing the right to use intangible underlying assets, other than subscription-based information technology arrangements, should not be classified separately from assets representing the right to use tangible underlying assets. Finally, the Board tentatively decided that assets representing the right to use intangible underlying assets should be classified separately from owned intangible assets.
Minutes Archive
Classification of Nonfinancial Assets—Tentative Board Decisions to Date
The Board tentatively decided the following:
- The scope should be limited to the classification of nonfinancial assets and related presentation and disclosure issues.
- The following pairs of contrasting assets should be explored further:
- Tangible capital assets held for sale and tangible capital assets used for service
- Nonfinancial investments and financial investments
- Intangible capital assets and tangible capital assets
- Intangible lease assets and tangible owned assets
- Contracts for the right to use intangible assets and leases of tangible assets.
- Assets consumable in lieu of cash and receivables of nonfinancial assets should be considered in this project.
- Capital assets held for sale should be classified separately from capital assets used for service and reported by major class of asset.
- Intangible capital assets should be classified separately from tangible capital assets by requiring them to be reported by major class separate from major classes of tangible capital assets.
- Intangible lease assets should be classified separately from tangible owned capital assets by requiring them to be reported by major classes separate from major classes of tangible capital assets.
- Right-to-use assets recognized for subscription-based information technology arrangements should be classified separately from other capital assets.
- Assets representing the right to use intangible underlying assets, other than subscription-based information technology arrangements, should not be required to be classified separately from assets representing the right to use tangible underlying assets.
- Assets representing the right to use intangible underlying assets should be classified separately from owned intangible assets.
- Nonfinancial investments should not be required to be classified separately from financial investments on the face of the financial statements or require any new disclosures.
- Receivables for nonfinancial assets should not be classified separately from other receivables.
- The term held for sale should be used and defined. The definition of a tangible capital asset held for sale will be similar to the criteria established by the FASB but modified for governments.
- Capital Assets that have been classified as held for sale should be reclassified as used for service if the usage of the asset changes over time.
- The definition of held for sale should include the following criteria:
- The government has decided to sell the asset.
- It is probable that the sale will occur within one year of the financial statement date.
- The following factors should be considered when evaluating whether it is probable that the sale will occur:
- The asset is available for immediate sale in its present condition
- An active program to locate a buyer has been initiated, incorporating the idea of an asset being put out for bid
- Market conditions for the type of asset
- Regulatory approvals needed to sell the asset.
- The guidance on held for sale should not incorporate the following as either a criterion or a factor to consider:
- The asset being marketed at a reasonable price
- The likelihood of significant changes to the plan to sell the asset.
- The asset being marketed at a reasonable price
- The definition of held for sale should not include exceptions to the timeframe criterion or for newly acquired assets.
- The held for sale criteria should not define or use the term disposal group.
- The term nonfinancial asset should not be defined in this project.
- The transition provisions of the proposed guidance require retroactive application.
- The effective date of the proposed guidance will be fiscal years beginning after June, 15, 2025 and will encourage earlier application.