Infrastructure Assets
Project Description: This proposed project would address issues related to accounting and financial reporting for infrastructure assets. The project would evaluate standards-setting options related to reporting infrastructure assets to make information (1) more comparable across governments and more consistent over time, (2) more useful for making decisions and assessing government accountability, (3) more relevant to assessments of a government’s economic condition, and (4) better reflect the capacity of those assets to provide service and how that capacity may change over time.
Status: Initial Deliberations
Background: Prior to the issuance of Statement 34, reporting infrastructure assets only was required for business-type activities. With the introduction of the governmentwide financial statements prepared using the economic resources measurement focus and accrual basis of accounting, infrastructure assets used by governmental activities were first reported for governmental activities. Although some stakeholders disagreed with that decision, the Board decided that reporting infrastructure assets of governmental activities is essential to provide information for assessing financial position and changes in financial position and for reporting the cost of programs or functions. To address some concerns related to the cost of providing such information, the Board extended the transition period to provide that information and to allow smaller governments (phase 3 governments with total annual revenues of less the $10 million in the first fiscal year ending after June 15, 1999) to report infrastructure asset prospectively
As discussed in more detail below in the relevant literature for reporting infrastructure assets, infrastructure assets are reported either using net book value (historical cost net of accumulated depreciation) or the modified approach to reporting infrastructure. During the development of Statement 34, the Board considered other alternatives to reporting infrastructure assets at net book value. One such alternative was the preservation method, which proposed reporting a capital use charge in the statement of activities based on changes in an asset’s condition level. The Board heard from engineers and transportation finance officers at that time that, although those approaches are of great value in managing infrastructure assets, they had not developed to the point at which consistent measurement methods or scales could be used to assess condition sufficiently for recognition in financial statements. The Board tabled the preservation method and did not include the option in Statement 34 due to measurement and other issues. However, as a compromise the Board decided that it was important to allow governments to begin reporting using a method other than net book value. The result of that compromise was the modified approach.
In addition, the pre-agenda research noted that users consider information related to the deferral of costs for the maintenance and preservation of capital assets valuable. Generally, users expressed a desire to receive additional information that could be used in their assessments of the long-term and short-term capital needs of a government.
Accounting and Financial Reporting Issues: The project is considering the following issues:
Work Plan:
Minutes of Meetings, August 9–10, 2023
The Board began its deliberations on potential improvements to historical cost depreciation by analyzing the use of estimated useful lives, specifically those that are too short for use in depreciating infrastructure assets. The Board directed the staff to further explore the existing guidance on the use of estimated useful lives and consider the advantages and disadvantages of potentially requiring the evaluation of estimated useful lives in level A guidance set by the Board.
Next, the Board deliberated on the discussion of the requirements to use a preservation method to report infrastructure assets. The Board tentatively decided that a government deciding to use a preservation method should be required to use a capital asset management system. Next, the Board deliberated the minimum required characteristics of that capital asset management system. The Board tentatively decided that the capital asset management system should have an up-to-date inventory of infrastructure assets. The Board also tentatively decided that the capital asset management system should summarize condition assessments of infrastructure assets. The Board discussed whether a standardized condition assessment system should be used for infrastructure assets measured using a preservation method. The Board tentatively decided that a standardized condition assessment system should not be used. The Board also discussed whether to prescribe a minimum condition level for infrastructure assets reported using a preservation method. The Board tentatively decided not to prescribe a minimum condition level. The Board also discussed whether a capital asset management system should estimate annual amounts necessary to maintain and preserve infrastructure assets. The Board directed the staff to further explore such a requirement in the context of the definition of a capital asset management system.
Next, the Board discussed the period of time over which complete condition assessments of infrastructure assets measured using a preservation method should be required to be performed. The Board tentatively decided that complete condition assessments should be performed over three years. The Board then discussed whether a preservation method should still be allowable if infrastructure assets are not being preserved at the established condition level. The Board tentatively agreed that a preservation method should not be allowable if the condition level of infrastructure assets is below the condition established in a government’s policy of preservation. The Board directed the staff to explore periods over which assessments should be evaluated to make the determination as to whether the condition level of infrastructure assets is below the condition established in a government’s policy of preservation. The Board then discussed whether tracking the replacement cost of infrastructure assets should be required to use a preservation method to measure infrastructure assets. The Board tentatively decided not to require tracking of the replacement cost to use a preservation method.
Minutes of Meetings, June 27–29, 2023
The Board discussed the proposed modifications to the definition of infrastructure assets provided in Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments. The Board tentatively decided to define infrastructure assets as “assets that are part of a network of long-lived capital assets utilized to provide a particular type of public service, that are stationary in nature, and that can be preserved for a significant number of years.” Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, lighting systems, and communication networks. Only buildings that are part of a network of assets used to provide a particular type of public service should be considered infrastructure assets.
Next, the Board discussed whether infrastructure assets should continue to be recognized in the financial statements. The Board tentatively decided that infrastructure assets should continue to be recognized in the financial statements.
Lastly, the Board deliberated on the discussion of measurement methodologies of infrastructure assets. The Board tentatively decided that infrastructure assets should continue to be measured using the historical cost depreciation approach with an allowance for governments to elect to use a preservation method. Additionally, the Board asked the staff to explore potential improvements to historical cost depreciation by analyzing the use of estimated useful lives and separation of significant parts of infrastructure.
Minutes of Meetings, May 16–17, 2023
The Board began deliberations on the definition of infrastructure assets and tentatively decided that modifications to the definition provided in paragraph 19 of Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, should be considered to better distinguish the characteristics of infrastructure assets from other capital assets.
The Board tentatively decided the following:
Project Description: This proposed project would address issues related to accounting and financial reporting for infrastructure assets. The project would evaluate standards-setting options related to reporting infrastructure assets to make information (1) more comparable across governments and more consistent over time, (2) more useful for making decisions and assessing government accountability, (3) more relevant to assessments of a government’s economic condition, and (4) better reflect the capacity of those assets to provide service and how that capacity may change over time.
Status: Initial Deliberations
- Background
- Accounting and Financial Reporting Issues
- Project History
- Current Developments
- Work Plan
- Recent Minutes
- Tentative Decisions
- Project staff:
Infrastructure Assets—PROJECT PLAN
Background: Prior to the issuance of Statement 34, reporting infrastructure assets only was required for business-type activities. With the introduction of the governmentwide financial statements prepared using the economic resources measurement focus and accrual basis of accounting, infrastructure assets used by governmental activities were first reported for governmental activities. Although some stakeholders disagreed with that decision, the Board decided that reporting infrastructure assets of governmental activities is essential to provide information for assessing financial position and changes in financial position and for reporting the cost of programs or functions. To address some concerns related to the cost of providing such information, the Board extended the transition period to provide that information and to allow smaller governments (phase 3 governments with total annual revenues of less the $10 million in the first fiscal year ending after June 15, 1999) to report infrastructure asset prospectively
As discussed in more detail below in the relevant literature for reporting infrastructure assets, infrastructure assets are reported either using net book value (historical cost net of accumulated depreciation) or the modified approach to reporting infrastructure. During the development of Statement 34, the Board considered other alternatives to reporting infrastructure assets at net book value. One such alternative was the preservation method, which proposed reporting a capital use charge in the statement of activities based on changes in an asset’s condition level. The Board heard from engineers and transportation finance officers at that time that, although those approaches are of great value in managing infrastructure assets, they had not developed to the point at which consistent measurement methods or scales could be used to assess condition sufficiently for recognition in financial statements. The Board tabled the preservation method and did not include the option in Statement 34 due to measurement and other issues. However, as a compromise the Board decided that it was important to allow governments to begin reporting using a method other than net book value. The result of that compromise was the modified approach.
In addition, the pre-agenda research noted that users consider information related to the deferral of costs for the maintenance and preservation of capital assets valuable. Generally, users expressed a desire to receive additional information that could be used in their assessments of the long-term and short-term capital needs of a government.
Accounting and Financial Reporting Issues: The project is considering the following issues:
- How should infrastructure assets be recognized and measured in financial statements? Should the optional use of the modified approach continue to be allowed to report infrastructure assets?
- Should additional information related to the maintenance and preservation of infrastructure assets be presented in financial statements and, if so, what information and what method of communication should be used to provide that information?
- Pre-agenda research approved: August 2019
- Consultative group established? No
- Research results reported to the Board: February 2023
- Added to current technical agenda: April 2023
- Task force established? In progress
- Deliberations began: May 2023
Work Plan:
| Board Meetings | Topics to Be Considered |
| September–
October 2023 |
Issues related to recognition and measurement of infrastructure assets, including grouping of infrastructure assets and the use of the modified approach |
| December 2023–
March 2024 |
Reporting information related to maintenance and preservation of infrastructure assets |
| April 2024 | Review first draft of Preliminary Views |
| May 2024 | Review preballot draft of a Preliminary Views |
| July 2024 | Review ballot draft of a Preliminary Views and consider for approval |
| July–October 2024 | Comment period |
| November 2024–
April 2025 |
Redeliberations based on respondent feedback |
| April–August 2025 | User feedback on proposed disclosures |
| September 2025 | Consideration of user feedback on proposed disclosures |
| November
2025 |
Review first draft of standards section of a proposed Statement |
| December
2025 |
Review preballot draft of an Exposure Draft of a proposed Statement |
| January 2026 | Review ballot draft of an Exposure Draft of a proposed Statement and consider for approval. |
| February–April 2026 | Comment period |
| June–November 2026 | Redeliberations based on respondent feedback |
| January 2027 | Review preballot draft of a final Statement |
| February 2027 | Review ballot draft of a final Statement and consider for approval |
Infrastructure Assets—Recent Minutes
Minutes of Meetings, August 9–10, 2023
The Board began its deliberations on potential improvements to historical cost depreciation by analyzing the use of estimated useful lives, specifically those that are too short for use in depreciating infrastructure assets. The Board directed the staff to further explore the existing guidance on the use of estimated useful lives and consider the advantages and disadvantages of potentially requiring the evaluation of estimated useful lives in level A guidance set by the Board.
Next, the Board deliberated on the discussion of the requirements to use a preservation method to report infrastructure assets. The Board tentatively decided that a government deciding to use a preservation method should be required to use a capital asset management system. Next, the Board deliberated the minimum required characteristics of that capital asset management system. The Board tentatively decided that the capital asset management system should have an up-to-date inventory of infrastructure assets. The Board also tentatively decided that the capital asset management system should summarize condition assessments of infrastructure assets. The Board discussed whether a standardized condition assessment system should be used for infrastructure assets measured using a preservation method. The Board tentatively decided that a standardized condition assessment system should not be used. The Board also discussed whether to prescribe a minimum condition level for infrastructure assets reported using a preservation method. The Board tentatively decided not to prescribe a minimum condition level. The Board also discussed whether a capital asset management system should estimate annual amounts necessary to maintain and preserve infrastructure assets. The Board directed the staff to further explore such a requirement in the context of the definition of a capital asset management system.
Next, the Board discussed the period of time over which complete condition assessments of infrastructure assets measured using a preservation method should be required to be performed. The Board tentatively decided that complete condition assessments should be performed over three years. The Board then discussed whether a preservation method should still be allowable if infrastructure assets are not being preserved at the established condition level. The Board tentatively agreed that a preservation method should not be allowable if the condition level of infrastructure assets is below the condition established in a government’s policy of preservation. The Board directed the staff to explore periods over which assessments should be evaluated to make the determination as to whether the condition level of infrastructure assets is below the condition established in a government’s policy of preservation. The Board then discussed whether tracking the replacement cost of infrastructure assets should be required to use a preservation method to measure infrastructure assets. The Board tentatively decided not to require tracking of the replacement cost to use a preservation method.
Minutes of Meetings, June 27–29, 2023
The Board discussed the proposed modifications to the definition of infrastructure assets provided in Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments. The Board tentatively decided to define infrastructure assets as “assets that are part of a network of long-lived capital assets utilized to provide a particular type of public service, that are stationary in nature, and that can be preserved for a significant number of years.” Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, lighting systems, and communication networks. Only buildings that are part of a network of assets used to provide a particular type of public service should be considered infrastructure assets.
Next, the Board discussed whether infrastructure assets should continue to be recognized in the financial statements. The Board tentatively decided that infrastructure assets should continue to be recognized in the financial statements.
Lastly, the Board deliberated on the discussion of measurement methodologies of infrastructure assets. The Board tentatively decided that infrastructure assets should continue to be measured using the historical cost depreciation approach with an allowance for governments to elect to use a preservation method. Additionally, the Board asked the staff to explore potential improvements to historical cost depreciation by analyzing the use of estimated useful lives and separation of significant parts of infrastructure.
Minutes of Meetings, May 16–17, 2023
The Board began deliberations on the definition of infrastructure assets and tentatively decided that modifications to the definition provided in paragraph 19 of Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments, should be considered to better distinguish the characteristics of infrastructure assets from other capital assets.
Infrastructure Assets—Tentative Board Decisions to Date
The Board tentatively decided the following:
- Infrastructure assets should be defined as “assets that are part of a network of long-lived capital assets utilized to provide a particular type of public service, that are stationary in nature, and that can be preserved for a significant number of years.” Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, lighting systems, and communication networks. Only buildings that are part of network of assets used to provide a particular type of public service should be considered infrastructure assets.
- Infrastructure assets should continue to be recognized in the financial statements.
- Infrastructure assets should continue to be measured using the historical cost depreciation approach with an allowance for governments to elect to use preservation method.
- A preservation method used to measure infrastructure assets should require the following:
- The use of a capital asset management system that has the following minimum required characteristics:
- An up-to-date inventory of infrastructure assets, and
- Summarizes condition assessments and document estimates of annual amounts to maintain and preserve infrastructure assets.
- A standardized condition assessment system should not be used to assess infrastructure assets measured using a preservation method.
- A minimum condition level should not be prescribed for infrastructure assets measured using a preservation method.
- Complete condition assessments should be performed over three years for infrastructure assets measured using a preservation method.
- A change to a government’s policy of preservation is a change in accounting principle.
- A preservation method should not be allowed to measure infrastructure assets if the condition level of infrastructure assets is below the condition established in a government’s policy of preservation.
- The tracking of the replacement cost of infrastructure assets should not be requirement to use a preservation method.