In September 2024, the Governmental Accounting Standards Board (GASB) issued Statement No. 104, Disclosure of Certain Capital Assets (GASB 104), which clarifies and expands disclosure requirements for certain classes of capital assets. This standard is effective for fiscal years beginning after June 15, 2025.
One important aspect to know about this new statement is that it doesn’t include any changes to current recognition or measurement requirements, instead the provisions are limited to the disclosures only. Here are the key points related to the changes.
Disclosure by asset class
GASB 104 requires your government organization to disclose detailed information about capital assets in your financial statement footnotes, including breaking out capital assets by major class. Readers of your financial statements don’t need to know all the details about every individual capital asset, but disclosures of certain capital asset classes are required, including those held for sale. Here are the steps you should take to prepare the required disclosures.
Classify your assets
First, related to asset classifications within the capital asset roll-forward footnote, lease assets and intangible right-to-use assets from public-public partnerships and availability payment arrangements (PPPs and APAs) should be disclosed separately by major class (i.e., buildings, equipment, etc.) of underlying asset in the capital assets note disclosures. Subscription assets (SBITAs) should be separately disclosed on its own line within the footnote. In addition, any other intangible assets are to be disclosed separately by major class.
Your organization may already be breaking out the major classes of leases, PPPs/APAs, and intangible assets in the roll-forward table of the footnote, in which case you already comply with this aspect of the new standard.
Identify capital assets held for sale
Second, the statement introduces the classification of capital assets held for sale. The good news is that the standard only requires an additional disclosure for these assets — and not in the roll-forward schedule itself.
Note: You shouldn’t break out held for sale capital assets separately on the face of the statement of net position nor as separate lines in the capital asset roll-forward table(s). The disclosure requirement is for a separate paragraph in the capital asset footnote.
It’s extremely important to understand GASB’s definition of “held for sale” as it’s only the assets meeting this definition that can be disclosed as such. “Held for sale” is defined as a capital asset where both:
- The government has decided to pursue the sale of the capital asset.
- It’s probable that the sale will be finalized within one year of the financial statement date.
Factors to consider when evaluating a probable sale
This assessment of capital assets should happen with each reporting period. Consider the following factors when evaluating whether it’s probable that the sale will be finalized within one year of the financial statement date:
- Whether the asset is available for immediate sale in its present condition.
- Whether an active program to locate a buyer has been initiated, including bid solicitation.
- The market conditions for selling that type of asset.
- Regulatory approvals, if needed, to sell the asset.
Note: Your organizations may have assets it considers “held for sale” that don’t meet the GASB definition. Consider only those capital assets that are held for sale in accordance with the specific definition in this standard.
When thinking about these indicators, it’s helpful to keep the following in mind:
- “Immediate sale” considers whether the government needs to use the asset for an extended period before it’s available to be sold; if so, this factor wouldn’t be met. For example, if a building will be used for classes throughout the entire school year, the building wouldn’t be considered available for immediate sale until the end of the school year.
- “Active program” means the government should be actively seeking a buyer, such as engaging a real estate agent. This doesn’t mean that a buyer has been identified, nor does it require a letter of intent to purchase.
- “Market conditions” provide that an asset doesn’t necessarily need to be marketed at a reasonable price/fair market value. Rather, your organization could request bids from potential buyers. Essentially, you should consider if there’s a market to sell the asset. A lack of market could preclude your organization from concluding the asset is held for sale.
- “Regulatory approvals” is a key part of your assessment for “held for sale.” Consider the process for obtaining any regulatory approval, or lack thereof, in making your determination. For example, if a capital asset was purchased with federal funding and federal regulator approval is necessary before the asset can be sold, and that approval has yet to be obtained, that capital asset may not meet the definition of “held for sale” for purposes of this disclosure.
Examples of an example capital asset disclosure and capital asset held for sale disclosure can be found in the appendices to GASB 104.
A plan for implementation
Where should you start when implementing GASB 104 in your organization? A great first step is reading the statement from top to bottom (don’t worry, the core text is just two pages long).
Next, analyze your organization’s current capital asset footnote disclosures to determine what you may need to change. Put a plan in place to aggregate the data for the disclosure related to capital assets held for sale. The department preparing your financial statements may not be aware of all the significant asset classes and potential assets held for sale, so this effort may be multidepartmental, requiring communication and coordination.
Once appropriate asset classes and assets held for sale are identified, draft (or update) the disclosure(s). By the time you’ve gone through the previous steps and analysis, come year-end the only task that will be needed is to just drop in the numbers in the appropriate location of the footnote.
Closing thoughts
The implementation of GASB 104 isn’t just a compliance exercise but an opportunity for your organization to enhance its reporting and disclosure practices. By assessing these new capital asset disclosure requirements, you can better prepare for and report items appropriately. Ultimately, the goal of GASB 104 is to provide transparency and ensure that stakeholders are well-informed about the types of capital assets and significant capital asset activity at your organization.
As you consider this new standard, feel free to reach out — we’re happy to help.
