GASB Proposal Would Establish Guidance for Intangible Assets

Norwalk, CT, December 27, 2006—The GASB today issued a proposal that would establish accounting and financial reporting guidance for intangible assets. The proposal describes an intangible asset as an asset that lacks physical substance, is nonfinancial in nature, and has an initial useful life extending beyond a single reporting period. Examples of intangible assets include easements, computer software, water rights, timber rights, patents, and trademarks.

Intangible assets, and more specifically easements, are referred to in the description of capital assets in Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments. This reference has prompted questions about whether and when certain intangible assets should be considered capital assets for financial reporting purposes.

Today's Exposure Draft addresses these questions and should lead to greater consistency in the accounting and financial reporting of intangible assets among governments, particularly in the areas of recognition, initial measurement, and amortization. As a result, the proposal should enhance the comparability of the financial information provided to taxpayers, municipal bond analysts, and other users of state and local government financial statements.

Specifically, today's proposed Statement would:

  1. Require that all intangible assets subject to its provisions be classified as capital assets. Accordingly, existing authoritative guidance related to the accounting and financial reporting for capital assets would be applied to these intangible assets, as applicable
  2. Provide authoritative guidance that specifically addresses the unique nature of intangible assets, including:
    1. Requiring that an intangible asset be recognized in the statement of net assets only if it is considered identifiable
    2. Establishing a specified-conditions approach to recognizing intangible assets that are internally generated
    3. Providing guidance on recognizing internally generated computer software
    4. Establishing guidance specific to intangible assets related to amortization.

"Today's proposal will improve financial reporting by reducing inconsistencies that have developed in accounting and financial reporting for intangible assets," said Robert Attmore, GASB chairman. "In doing so, the proposed Statement when finalized will foster greater comparability among state and local government financial statements and result in a more faithful representation of the service capacity of intangible assets and, therefore, the financial position of governments."

The requirements of today's proposed Statement would be effective for financial statements for periods beginning after June 15, 2009. The provisions of this proposed Statement generally would be required to be applied retroactively.

A copy of the proposal, entitled Accounting and Financial Reporting for Intangible Assets, may be downloaded from the GASB's website at

The Board is seeking written comments on the proposal by March 23, 2007. The Board also plans to hold a public hearing during the Board's regular meeting on April 3, 2007, in Norwalk, Connecticut. Parties interested in participating at the public hearing must provide, by March 23, 2007, a written notice of intent to participate and a copy of written comments addressing today's proposal. The notification and written submission should be emailed to, Project No. 9-4, or via regular mail to:

Director of Research and Technical Activities
Governmental Accounting Standards Board
401 Merritt 7
PO Box 5116
Norwalk, CT 06856-5116

Any individual or organization that wants to provide written comments but does not intend to participate in the public hearing may do so through an Internet-based comment form. Alternatively, comments may be emailed to, Project No. 9-4, or mailed to the address above.

About the Governmental Accounting Standards Board

The GASB is the independent, not-for-profit organization formed in 1984 that establishes and improves financial accounting and reporting standards for state and local governments. Its seven members are drawn from the Board's diverse constituency, including preparers and auditors of government financial statements, users of those statements and members of the academic community. More information about the GASB can be found at its website