Fixed Asset Accounting Guide A Fixed Asset Accounting Guide For School Districts
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Fixed Asset Accounting Guide: School Districts
Real Asset Management
A Fixed Asset Accounting Guide For School Districts What is a Fixed Asset? A fixed asset refers to any equipment or property purchased or donated by a district, which is in active use within the district’s operations. Fixed assets are generally worth a significant dollar value and offer some type of benefit for an extended period of time, typically in excess of one year. In most cases, fixed assets are depreciated and reported on within a school district’s financial statements.
Fixed Asset Accounting for School Districts Precise fixed asset data is essential to most school districts, particularly from a business perspective. Reliable fixed asset records enable business officials to protect the district’s investments. From providing values for insurance coverage to reporting requirements and financial statements, proper fixed asset management is a key factor in formulating policies and strategies for acquisitions, maintenance, replacement and retirement of a district’s fixed asset base. Furthermore, proper fixed asset management procedures enable school districts to effortlessly address GASB 34 reporting requirements. Real Asset Management (RAM) is a leading provider of fixed asset management software, with an especially strong presence in the education sector. This document is meant to serve as a guide for school districts looking to formalize fixed asset management processes and procedures. Each district will have its own policies and guidelines established; the information below is simply a starting point for districts re-evaluating current protocols. The document covers everything from depreciation and capitalization policies to fixed asset categories and physical audit procedures.
Governmental Accounting Standards Board (GASB) GASB institutes and monitors standards to improve governmental accounting and financial reporting within state and local entities (school districts included), resulting in more useful data to better guide public issuers, auditors and users of financial reports. GASB 34 requires that fixed asset records be maintained by school districts in a complete, accurate and detailed manner and that districts report on all capital assets and depreciation (including infrastructure assets) and any items categorized as “historical treasures.” RAM’s fixed asset accounting module, Asset4000, assists school districts in complying with all fixed asset-related GASB 34 requirements. The system records vital data such as acquisition dates and costs, asset lives and depreciation policies for all capital asset classifications. Asset4000 then calculates depreciation and produces detailed fixed asset reports needed to complete the Statement of Activities required by GASB.
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Fixed Asset Accounting Guide
Fixed Asset Accounting Guide: School Districts
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Capitalization Policies Most school districts set a capitalization threshold equal to the Federal rate. Fixed assets with a value greater than or equal to the capitalization threshold are typically capitalized and depreciated. There are exceptions to this rule; please be sure to refer to your district’s specific guidelines. Fixed assets valued at less than the Federal rate, but more than $1,000, are typically entered as inventory items in financial statements. Inventory items are not depreciated; however they can still be recorded as fixed assets if their useful life is greater than one year.
Depreciation Depreciation is apportioning the cost of a fixed asset over a period of time, instead of deducting the total cost as an expense upon purchase. Fixed assets, over time, gradually decline in value; it is important to take this into consideration if a district’s net assets are to be declared accurately. Each district will have its own depreciation policies; for example, a district may depreciate all fixed assets valued at more than $3,000 over the course of the assets’ useful lives – this directly relates to your district’s capitalization policies. All assets valued at less than $3,000 can be recorded and managed in the district’s inventory register/non-capitalized asset register. Five factors are required in order to produce an accurate depreciation figure:
Date placed in service a new asset is placed in service immediately upon acquisition, its date placed in service is simple to establish. If an asset is added to a district’s register that was already placed in service but originally excluded from the fixed asset register, determining the date placed in service will be more of a challenge.
Acquisition value Fixed assets are typically recorded at historical cost. If an asset, such as a building, is of significant value, a more formal appraisal may be required to determine its value. For assets that have been excluded from the fixed asset register, you may first want to try researching the item’s historical cost. If that information is unavailable, it is permissible to estimate the amount based on a similar asset’s value.
Salvage value This is referring to an asset’s value at the end of its useful life. To determine an item’s salvage value, you may wish to refer to guidelines provided by the Government Finance Officers Association (GFOA) or a similar professional organization.
Estimated useful life The estimated useful life of an asset refers to the number of years that an asset can be used for its original intent; for example: IT equipment:
7 years
Vehicles:
10 years
Buildings:
50 years
Each school district is likely to have its own recommendations on estimated useful lives for each asset category.
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Fixed Asset Accounting Guide
Fixed Asset Accounting Guide: School Districts
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Depreciation method School districts often use the Straight-line method to calculate depreciation on fixed assets; that calculation would consist of the following:
Depreciation = Acquisition Value – Salvage Value / Estimated Useful Life The asset is written off evenly over the course of its useful life, resulting in equal depreciation from year to year.
Fixed Asset Categories Books Textbooks and library books fall into this category. Books with a useful life of more than one year can be classified as fixed assets. Books purchased in large quantities may meet your district’s capitalization threshold and can be depreciated as a group.
Historical Treasures These items should be recorded at historical cost or fair market value if donated. Items covered in this category include original paintings, books, etc.; because they are considered ‘inexhaustible’, depreciation is not required.
Portable Structures This is referring to any temporary structure added to a building’s site. These structures are typically worth a significant value and can be recorded and treated as a fixed asset.
Work in Progress Work in Progress (WIP), or Construction in Progress (CIP), can be used when reporting amounts related to an incomplete capital project. WIP is not depreciated. When a project is complete, its total cost can be transferred over to the appropriate account in the district’s fixed asset register.
Equipment & Machinery Any IT equipment, athletic equipment, office furniture or machinery will generally fall into this category. These items can be recorded at acquisition cost. If donated, each asset should be assigned a fair market value. Districts that purchase large quantities of equipment and machinery typically combine the costs for financial reporting purposes.
Vehicles Busses, cars, etc. fall into this category. If purchased, the items should be entered at acquisition cost. If donated, the items should be recorded at fair market value.
Buildings Buildings are typically valued at the time of acquisition or construction. Broker and architect fees, permits, etc. can be covered within this category. If a building is donated, it should be recorded at fair market value on the date of donation. Building components, such as a roof, are normally recorded separately since the value and useful lives of these components equal much less than the building itself.
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Fixed Asset Accounting Guide
Fixed Asset Accounting Guide: School Districts
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Building Improvements Any improvement that extends the useful life of a building will fall into this category and should be capitalized. Improvements are commonly recorded at acquisition cost or, if donated, recorded at the fair market value. Building improvement examples include roofing, remodeling, replacements, etc.
Land Improvements Includes improvements that are permanent and add a significant value to the land, such as fencing and excavation (site improvements) and driveways, parking lots and roads (infrastructure). Non-permanent improvements can be covered under machinery/equipment.
IT Asset Management IT asset management is the process of tracking and managing your district’s IT assets by school, department, etc. Verifying the existence and location of these assets can be difficult and time consuming. As a result, physical audits are often thought of as a tedious task that some school districts choose to carry out as infrequently as possible. However, more and more districts are now implementing inventory tracking systems to manage software, networks, hardware, and the contracts associated with those assets. Without a specialist system, IT asset data will quickly become redundant and assets will eventually become under-maintained and under-utilized. RAM’s Track4000 and Inventory4000 modules are used by school districts nationwide to effortlessly address the issue of IT asset management. Within the system, school officials can also maintain accurate audit trails by recording transfer and disposal events. Having accurate inventory records provides school districts with several obvious benefits; most importantly though, with Inventory4000 and Track4000, business officials will become more confident in the asset data and can then rely on it to make key business decisions relating to the allocation of costs and resources across their district. A specialist IT asset management/inventory tracking system will allow school officials to scan each item’s barcode and store detailed information such as: ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■ ■■
Location (school, floor, room number) Department Description Condition Purchase Cost Purchase Date Serial Number Barcode Number Make/Model/Manufacturer Estimated Useful Life Etc.
Data from the physical audit can then be uploaded back into the appropriate register, whether it’s the fixed asset or inventory register.
Summary All of the details above can be efficiently managed and easily accessed within Real Asset Management’s (RAM) fixed asset management and tracking modules. In addition to the depreciation and tracking functionality, RAM’s Series4000 product suite covers depreciation budgeting and forecasting, lessee asset accounting, capital project control, document management, helpdesk support and maintenance management.
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Fixed Asset Accounting Guide
Fixed Asset Accounting Guide: School Districts
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About Real Asset Management Real Asset Management (RAM) is a leading provider of CMMS and fixed asset management solutions. RAM’s solution is used by over 3,000 clients in more than 70 countries. RAM delivers high-quality, customizable software solutions worldwide. We offer a range of training and consulting services designed to enable our clients to make the most of their CMMS system. Please visit www.realassetmgt.com to find out more or call 617 457 7838 to arrange a call to discuss your requirements and setup a web demonstration.
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