Capitalizing Trucks, an Access Road, and Resurfacing

The trucks cost $38,000 each, above the $10,000 equipment threshold, so they should be capitalized in the government-wide statements and depreciated over their useful lives. In the general fund, the purchase is an expenditure when acquired, because modified accrual reports current financial resources. The access road exceeds the $100,000 infrastructure threshold, but it is not part of the city's street network; it provides access to a water-treatment plant and is more appropriately capitalized as part of the plant or as a land improvement. It should be capitalized and depreciated in the government-wide statements and expensed in the general fund. The $75,000 resurfacing is below the infrastructure threshold and is likely routine maintenance, so it should be expensed in both statements unless it extends the useful life or restores condition in a way that meets the city's capital policy. The finance director's blanket statement is too broad; the accounting depends on the nature and use of the asset, not just the word 'road.'

The statement is not generally correct. GASB permits two approaches for eligible infrastructure: capitalization and depreciation, or the modified approach, under which the asset is not depreciated if the government maintains it at or above a documented condition level and assesses condition at least every three years. The modified approach requires an asset management system, condition assessments, disclosure of the condition level and assessment results, and no deferred maintenance that would prevent meeting the condition level. It applies only to infrastructure that is part of a network or subsystem, not to an access road that is part of a water-treatment plant. The city should adopt a written policy, apply it consistently, and disclose the approach. Routine resurfacing may be a preservation cost under the modified approach, while a project that increases capacity or extends useful life may need to be capitalized.